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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... 

    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
    Stocks: BP
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