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Adam Sharp

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  • BP Will Be OK [View article]
    Well said Mr. Carlini. It's unfortunate for these widows and pensioners who own BP, which we keep hearing about.

    It'd be even more unfortunate if the people adversely affected by BP's wrongdoing had to take a portion of the damages upon themselves. But it's already happening. Hopefully Feinberg does a bangup job with this $20b fund.
    Jun 20, 2010. 03:28 PM | 1 Like Like |Link to Comment
  • A Real Worst-Case Scenario for BP: 20M Barrels, $560B Damages [View article]
    Indeed, bacteria will play the major role in this cleanup. But that could have substantial consequences as well. As I understand it, these organisms absorb oxygen, possibly crowding out other life forms.

    If they're successful enough, it could temporarily deplete oxygen levels in the water.
    Jun 16, 2010. 05:05 PM | 1 Like Like |Link to Comment
  • A Real Worst-Case Scenario for BP: 20M Barrels, $560B Damages [View article]
    Maybe adjust the brightness on your screen? I can see pretty clearly oil leaking from a fissure in the ground, slowly at first, then spiking.

    The video was captured by an ROV attached to Poseidon 2, one of the ships on the scene. The depth shows 5k, which is consistent with the Macondo well (assuming it's feet, not meters). And the date reads June 15 2010.
    Jun 16, 2010. 03:13 PM | 1 Like Like |Link to Comment
  • BP’s Contracts Are in 'Deep' Trouble [View article]
    "Deep" trouble. I see what ya did there.
    Jun 16, 2010. 11:51 AM | 1 Like Like |Link to Comment
  • BP: An Oily Gem [View article]
    What about:

    * Increased drilling costs going forward (new regulations)
    * Potential revoking of drilling leases/contracts
    * 1 million+ barrels of oil being pushed ashore by a hurricane
    * Raising $50b+ in capital markets

    Good luck. I got sucked into this value trap back at $50, stopped out at $46, and have only been short since. If I was still long, I'd buy long-dated out of the money puts to protect myself.
    Jun 15, 2010. 02:07 AM | Likes Like |Link to Comment
  • Where Is BP Headed: $70 or $0? [View article]
    If you're assigning a 10% risk of bankruptcy, why buy BP? Why not CVX, even RIG, somebody with more well-known liabilities?
    Jun 13, 2010. 11:04 AM | 4 Likes Like |Link to Comment
  • Should BP Be Allowed to Fail? [View article]

    You say, "As predatory as the banks were, they performed certain necessary functions in society to keep it from falling apart."

    Could those so-called "necessary" functions (CDO-creation, junk debt speculation, trading desks, plus a wee bit of investment banking) not be performed by others? Or kept active via a post-bankruptcy version of the company?

    It's the same for your argument on BP. Those who took the risk must bear the brunt of the pain. Bond and equity holders must be first in line for haircuts/wiping (if it comes to that, which it obviously hasn't yet). Anything else is economic madness.

    It doesn't mean firing all BP employees, far from it. Companies would buy up BP's assets and I imagine the vast majority of workers would keep their jobs.

    Spreading the pain around to everyone doesn't do any good, it just perpetuates a cycle of reckless Reverse-Darwinism.
    Jun 12, 2010. 12:12 AM | 4 Likes Like |Link to Comment
  • How BP Will Announce Its Dividend Suspensions [View article]
    Hi Felix,

    You wrote, "The losers here will be anybody who’s reliant on BP dividends for income".

    Would be interested to hear your thoughts on other potential losers from this disaster: workers denied compensation if there's not enough money to go around and UK taxpayers (if they eventually bail out BP).

    If it came down to some sort of insolvency, I wonder if workers owed compensation could be placed over bondholders on the totem pole?

    In a worst-case scenario, the question America would be asking is "How can we get the most $$ out of BP?". Seems like one tempting but politically-tricky option would be to stick it to bondholders and shareholders in favor of compensation to those affected by the spill.

    Who should come first, in that situation? Bondholders, or people who are put out of a job? If I remember correctly, creditors in the big asbestos bankruptcy cases maintained their seniority over govts.

    But the world is bailout-weary, so I think the reaction may be different this time around.
    Jun 11, 2010. 11:26 PM | 1 Like Like |Link to Comment
  • Whitney Tilson Explains Why He's Buying BP Shares [View article]
    I've thought about the possibility of a U.K. bailout too. And Gordon Brown might have done it.

    But will David Cameron, newly elected PM, who ran on a deficit-cutting platform? It's a lot less likely with him at the helm, I think.

    If the bank bailouts weren't so fresh on everyone's mind, I'd also give BP a higher chance of getting a big fat loan from the U.K. (should they need it, and they don't yet). But with all the anti-fat-cat sentiment worldwide, I think any judge or politician who is perceived as siding with BP will have a very tough time.
    Jun 9, 2010. 10:11 PM | 1 Like Like |Link to Comment
  • Whitney Tilson Explains Why He's Buying BP Shares [View article]
    If it costs $200b, can BP raise that much? I think $200b is a real possibility. I suppose it would be spread out over a few years, but still...

    Another issue is whether BP will be allowed to operate offshore oil rigs if safety reviews find negligence/errors, here and possibly elsewhere?

    Valdez cost Exxon $7b (inflation-adjusted). This could be 5-50x bigger in terms of total spill size (250k barrels vs 3-10 million). Add in the fact that it's a much more important ecological/economic area... And it's ugly.

    On June 1st I guessed that BP common stock had a 40% chance of being wiped:

    I think it's higher than that now, but my potential cost estimates are on the much higher end of ones I've seen. So take that as you will.

    Outcome possibilities as I see them:

    Best case: Another major steps in and buys them. Or UK organizes govt loans due to "all the widows and orphans who depend on BP for income". Widows... yeah.

    Middle of the road case: Dilution, asset sales, and higher drilling costs going forward.

    Worst case: Bankruptcy

    Disclosure: Like Tilson and most others in this debate, I'm talking my book. I'm short BP.
    Jun 9, 2010. 08:25 PM | 4 Likes Like |Link to Comment
  • Will BP Go Bust? [View article]
    Sure. And I realize that, as you suggest, these estimates are somewhat "back of the napkin". But that's all we can really do for now.

    I took Exxon's total inflation-adjusted cost for the Valdez spill ($7b) and multiplied it by how many times bigger this one could be. The flow-rate scientists interviewed by NPR say the official estimates of 5,000 barrels per day may be too low by 5-20x.

    The 5,000 bpd number is clearly low, as BP announced they were was siphoning that much off per day recently (which is just some unknown % of the overall leak).

    So we might be looking at 25,000 to 100,000 (potentially more) bpd leaking from the Gulf spill. Say it goes for 100 days before it's plugged.

    That gives a range of 2.5m - 10m barrels into the gulf. Valdez leaked 527,000 barrels. So if you assume equivalent cleanup costs, that's 5-20x more expensive than Valdez (Exxon's costs were $7b, $5b of which was in compensation to those affected).

    $7b x 5 = $35b
    $7b x 20 = $140b

    Then add in the fact that the Gulf area is a much larger fishery and commercial area than the part of Alaska affected by Valdez. We're talking about a region that produces 1/3rd of all commercial seafood in the U.S., does huge tourism revenue via beaches and casinos, and has a huge offshore drilling compenent that may be under threat as well.

    Some people think that Gulf marshes and shores will prove more vulnerable than rocky Alaskan shores to oil. Also, the spill could get much worse (hurricanes, failure to stop it, currents carrying it to Florida and East Coast, etc).

    My $50-$200b range is just an estimate, like everyone else's. I really hope it doesn't get that bad, as the enviromental/economic damage would be huge, but I'm considering the possibility.
    Jun 3, 2010. 10:14 PM | 2 Likes Like |Link to Comment
  • Will BP Go Bust? [View article]
    "I predict another screw job on the American public. I wish there was an ETF on that - They could name it SCREWING AMERICAN CITIZENS, Symbol : SAC"

    Yeah, a "moral hazard" index etf would have performed quite well over the past 18 months. Banks, homebuilders, CRE, insurers.
    Jun 1, 2010. 08:01 PM | 6 Likes Like |Link to Comment
  • Will BP Go Bust? [View article]
    Thanks Tony, you're right. It should read gallons not barrels.

    SA editors: If you're seeing this, could you fix that? All references to barrels in this section should be changed to gallons. My bad.

    "11 million barrels of crude into the ocean. Using the most conservative estimates, the Gulf disaster has already released 18 million barrels, and that number may be much higher — 100 million barrels or more."
    Jun 1, 2010. 05:28 PM | 2 Likes Like |Link to Comment
  • Marc Faber’s Latest on Banks, U.S. Equity Valuations, Gold [View article]
    Looks like SA couldn't embed the video interview. Here it is on my site, it's worth a watch:
    May 30, 2010. 04:57 PM | Likes Like |Link to Comment
  • The Decline of Google [View article]
    Business is still conducted with search. You don't use Facebook to find a contractor or buy a watch. It's why they're not a profit machine like Google.

    Their Q4 revenue was up 23% YoY. If that's not good growth, I don't know what is...
    May 18, 2010. 11:20 AM | 3 Likes Like |Link to Comment