7 Actions BP Must Take Immediately
The company must:
1-Produce detailed pro-forma five year financial statements showing they have the capacity to make it through the period given the steps below.
2-Announce a sale of 1 billion shares, something we called for at the very beginning of the event, and has, by delaying, cost the firm at least $5 billion. The UK Government might be needed now to buy half the shares, which they will agree not to sell for at least ten years.
3-Announce asset sales of at least $5-$10 billion
4-Sell production into the futures market, thereby taking in at least $15 billion, of future revenue.
5-Announce they are eliminating the dividend for at least three years.
6-Work out a back-up contingency loan with the UK, at a very low rate, perhaps, with an equity kicker, if needed.
7-Cut back capital expenditures to no more than $ 15 billion, the level of 3 years ago.
If they announce and carry out these measures, I am confident the stock, after perhaps an initial fall, will rebound 20% from current levels, given no further setbacks in the Gulf of Mexico. They will have provided investors and current and potential creditors of the financial flexibility assuring not just their survival, but normalized growth. With the capital raise, and corporate squeeze on spending, they will have at least $75 billion currently needed to reduce their current high cost of capital.***************
*****************UPDATED FAIR VALUE TABLE IF BP DOES NOT TAKE 7 STEPS**************************
FAIR VALUE =$20.48
| Year | ||||
| Discount Rate | 11% | Probability | 1 | $ 3.00 |
| Present Value | $31.1 | 35% | 2 | $ 1.00 |
| 3 | $ 2.00 | |||
| 4 | $ 3.00 | |||
| Discount Rate | 12% | 30% | 5 | $ 3.00 |
| Present Value | $28.14 | 6 | $ 3.00 | |
| 7 | $ 4.00 | |||
| Discount Rate | 15% | 15% | 8 | $ 3.00 |
| Present Value | $21.58 | 9 | $ 3.00 | |
| 10 | $ 4.00 | |||
| 11 | $ 5.00 | |||
| Discount Rate | 18% | 15% | 12 | $ 5.00 |
| Pres. Val | $17.22 | 13 | $ 5.00 | |
| 14 | $ 5.00 | |||
| 15 | $ 5.00 | |||
| Discount Rate | 25% | 10% | 16 | $ 5.00 |
| Pres. Vale | $11.39 | 17 | $ 5.00 | |
| 18 | $ 5.00 | |||
| 19 | $ 5.00 | |||
| Current FV | $20.48 | 20 | $ 5.00 | |
| 21 | $ 5.00 | |||
| 22 | $ 5.00 | |||
| 23 | $ 5.00 | |||
| 24 | $ 5.00 | |||
| 25 | $ 5.00 | |||
| 26 | $ 5.00 | |||
| 27 | $ 5.00 | |||
| 28 | $ 30.00 |
