Tag Archives: BP

BHP investors: hold on to your seatbelts, you’re in for a bumpy ride

This week, Mike van Dulken and Augustin Eden from Accendo Markets warn that BHP Billiton investors should brace themselves for legal action of BP proportions…

BHP Billiton (BLT) is this week underperforming a similarly weak commodity sector, one which is already under the cosh from a US dollar rebound, an oil price turning over from its highs and persistent global growth concerns after the latest China data sapping investor sentiment. The reason Billiton’s faring worse than its peers stems from news of a $44bn civil legal challenge from Brazilian federal prosecutors related to last November’s Samarco dam failure. That in itself may appear to be a minor driver. It’ll be sorted out soon, won’t it?

Er, well, something similar happened to BP about six years ago and this has quite rightly spooked investors, who would now appear to be pricing in the prospect of long and protracted litigation akin to that which BP only put to bed in July last year – a whole five years and $53.8bn after its 2010 Deepwater Horizon Gulf of Mexico disaster!

The claim against BHP Billiton relates to clean-up costs for waterways and villages, community rebuilding and compensation for the deaths of 19 people and resulting homelessness inflicted on a further 700. Sound familiar?

While BP worked tirelessly to limit the impact (both environmental and financial) of its disaster, several attempts to close the affair failed, and now a fresh legal challenge for BHP Billiton sees its situation echoing that endured by BP. The March 2016 settlement between BHP Billiton, its domestic partner Vale and the Brazilian government was potentially just the beginning of a long road. While there remains the possibility that such an imposing precedent as BP’s Gulf of Mexico disaster is inflating the claim against BHP, one can’t help but see investors take flight at the prospect of added risk in an already risky sector.

Sure, the Brazilian government has form for demanding initially huge reparations for environmental disasters before conveniently reducing them, and a smaller settlement may well be agreed for BHP and its Samarco colleagues. But there is no guarantee of this. Then again, this is Brazil, where the president faces impeachment and replacement by any one of a number of equally dubious cronies.

BHP shares are still holding their uptrend from 2016 lows. Just. However, after giving up 50 per cent of their 2016 gains (now up just 40 per cent YTD vs highs of 80 per cent on 21 April), we have to wonder whether an already difficult situation could get even messier.

This commentary was provided exclusively for Hot Commodity by Accendo Markets: https://www.accendomarkets.com.

BP boss Bob Dudley’s proposed pay rise is arrogant and offensive

Bob Dudley is usually pretty good at PR. The BP boss took the helm of the FTSE 100 oil major just after the 2010 Deepwater Horizon disaster – the biggest oil catastrophe in history – when its reputation was in tatters. Since then, the American executive has had to steer the company during an eye-wateringly difficult commodities rout, with the future of the oil market still in question.

At results conferences he usually made an effort to greet all us journalists individually, with a little comment to show that he actually registered who we were (“Ah City AM is a great paper” he said, having seen my name badge), something which I have found that few CEOs bothered to do.

But today it seems that he’s lost his touch. Unsurprisingly, the majority of shareholders voted against BP’s remuneration policy, which proposed hiking Bob’s pay up by 20 per cent to almost $20m (£14.1m) for 2015.

Put this figure alongside BP’s mammoth $5.2bn loss last year and 7,000 job cuts and it looks bad. Marie Antoinette bad.

I’ve seen commentators today argue that poor, overworked Bob has had a tougher time of it last year than a CEO would during a commodities boom (which is undoubtedly true) so he deserves the extra cash.

With this, I whole-heartedly disagree. I am sure that Bob’s job has been more stressful than any of us can envisage; trying to satiate employees, shareholders and everyone else while oil prices remain so painfully low must be nearly impossible. But I cannot imagine anyone in any other job being able to justify earning MORE money by arguing that the company – and their industry – is doing badly.

If that were the case, most journalists in the country would have been raking it in over the last decade, let alone supermarket employees etc etc. There are plenty of people all over the country working harder in tough conditions – this is no excuse for higher remuneration amid a backdrop of job cuts.

The other factor making Bob look bad is that his counterpart at FTSE 100 competitor Royal Dutch Shell, Ben van Beurden, took a whopping pay cut last year to €5.6m (£4.5m).

When we’re talking about such huge, incomprehensible sums it seems unfathomable why Bob would not have followed suit. He’s not stupid; he must have realised what the reaction would have been.

I’m not left-wing by any means – I support wealth creation and capitalism. But surely taking a salary of, say, a mere £5m would be enough for Bob and his family to live in the lifestyle they have become accustomed to, while sparing his reputation?

For sadly I think today’s events show that Bob now appears out of touch with his shareholders and – even worse – that he doesn’t care.