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Bill Wolf
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Former hedge fund analyst with Tiger Cub, currently managing a private account.
  • Some Facts About Gulf Fishing Industry 0 comments
    Jun 9, 2010 5:56 PM | about stocks: BP
    I've pulled some statistics on the fishing industry in the Gulf of Mexico.
    Here is the location of the data, from the National Marine Fisheries Service (OTC:NMFS). This data gives the pounds caught, and dollar value of the seafood landed by commercial fishers...  
    http://www.st.nmfs.noaa.gov/pls/webpls/FT_HELP.SPECIES 

    In the gulf states, which includes Texas, Louisiana, Alabama, Mississippi and the West Coast of Florida, the data looks like the following:
                 
    So, doing some quick math, conservatively assume the landed $ value is about 20% of industry value or throughput.  (have to pay the canneries, etc.)  That means over the last 4 years, the total industry value was about $3.3 billion per year. For the sake of giggles, assume BP has to pay 100% of this.  

    Also assume BP hires 95,000 people (more than coke, or microsoft employ worldwide) to clean up the mess at $50,000 per year.  That's another $4.75B per year in cleanup costs.  That's a total of $8.05B per year in costs to clean up the spill.  Assume it lasts for 20 years, and you have an NPV of $79B in total cleanup costs.  Given average historical profitability over the last 5 years, you also have more than $22B in operating profit left over every year after paying for $8B in cleanup costs.  

    These assumptions seem rather draconian to me, yet they are about what the market is pricing in.  The market has seemingly gone too far!

    Disclosure: Long BP stock, LEAPS and RIG LEAPS

    Disclosure: Long BP stock and LEAPS, RIG LEAPS
    Themes: oil Stocks: BP
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