On April 20, 2010 eleven men lost their lives, 10 of them with children, in the worst manmade environmental disaster in history. The ripple effect of the disaster began with these men and spread throughout the Gulf of Mexico. Now it's being felt in BP's (BP) wallet at an accelerating and alarming rate due to the business economic loss claims from its oil spill settlement.
In my first article on this subject, I wrote mostly about the BP settlement and how it could potentially bring BP to its knees if it doesn't win its appeal coming in July. BP itself has warned that losing that appeal could mean it will be "irreparably harmed." My first article contained a lot of speculation about the future based on a one day snapshot of the daily statistics page related on the website.
Now I continually monitor that website to develop a more factual speculation about the future and what it means for BP. In addition to keeping track of this week's statistics, I have a copy of the March 26th page for comparison.
|Date||Payment Offers||Total Amount||Average Offer|
|6/6 - 3/26||2,112||$571,322,402||$270,513|
|6/10 - 6/6||30||9,428,688||314,290|
|6/13 - 6/6||161||67,907,104||421,783|
|6/13 - 6/10||131||58,478,416||446,400|
The bottom numbers are formula driven from the top numbers. As one can clearly see, the average offer per claim has been steadily rising. Prior to March 26, it was $235,110. Between March 26 and June 6, it rose to $270,513. In the last week, the average claim amounts have risen to disturbing levels, with $314,290 average for the first 30 claims of the week and rising to $446,400 for the other 131 claims later in the week. I included the full week average above of $421,783 to smooth out any normal effect from weekends.
Were there a couple of very large claims that threw off the averages, in separate parts of the week? Or are larger and larger claims finally coming to the table as they inevitably take longer to review? I find this enormous jump in average claim size to be quite disturbing, if it's not an anomaly. Investors and shorts would be wise to keep a close eye on these statistics especially in light of this spike this week.
I confess that the raw number of claims of 161 is somewhat of a low number to generate an average and only 1 week doesn't necessarily make a trend, but it's a disturbing enough trend that should be at least paid close attention to. If that number stays high it will only serve to increase the odds that BP will be brought to its knees or worse.
The good news for BP investors is the total number of new offers for the past week is rather low and annualizes at around $3 billion from now until April 22, 2014 when the settlement expires, something BP could easily afford. The bad news is if the number of claims starts to truly accelerate anywhere near this high average dollar offer per claim as forecast, it could become a more dangerous threat to BP's health, more dangerous than I had originally imagined.