Business Ownership and Wealth Management

Dana Barfield

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BP as a Prospective Investment

Maybe Not...

Typically, when an event occurs that causes a stock’s price to drop significantly we would look at that stock as a potential investment. This is not and will not be the case with BP.

Our first criteria for investment, is that the business be one of significant quality. BP cannot be considered quality. As David Leonhardt pointed out in his May 31 New York Times article entitled “Spillonomics: Underestimating Risk”. BP has been a company seeking profits to the exclusion of other equally serious responsibilities.

Leonhardt wrote, “Years before the Deepwater Horizon rig blew, BP was developing a reputation as an oil company that took safety risks to save money. An explosion at a Texas refinery killed 15 workers in 2005, and federal regulators and a panel led by James A. Baker III, the former secretary of state, said that cost cutting was partly to blame. The next year, a corroded pipeline in Alaska poured oil into Prudhoe Bay. None other than Joe Barton, a Republican congressman from Texas and a global-warming skeptic, upbraided BP managers for their ‘seeming indifference to safety and environmental issues’.”

This fact alone removes BP from our consideration.
Additional issues which BP faces are enormous liabilities. After the Exxon Valdez spill, certain damages for this type of problem were capped at $75 million. However, BP has waived this limit and agreed to pay reasonable and appropriate damages. Had the company not done this, angry citizens, lawmakers, and consumers would have demanded their pound of flesh in some other way.

BP management seems to be either idiotic on the highest order or running completely scared of lawsuits and liability issues. Neither one serves anyone well.

The only potential silver lining here is that with all of these problems BP might possibly be liquidated in bankruptcy. If this happens perhaps its assets will be redeployed into the ownership of a more responsible and better run company.

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Dana is the president of The Barfield Group, which has provided industry leading Financial Advice, Investment Services, and helped people Plan for Retirement for more than 20 years. He is a frequent speaker and writer for a variety of industry, regional, and national publications on business ownership and wealth building related topics.