BP Gaffe of the Week: We Don't Know Why Our Share Price Is Falling

BP released Thursday one of the oddest statements since the Gulf oil spill disaster began. In response to a 16 percent drop in its share price yesterday, BP said in an SEC regulatory filing Thursday that its financial position was strong and could pay for the Gulf oil spill. Which isn't odd at all, except that the whole SEC filing kicked off with this statement: "The company is not aware of any reason which justifies this share price movement."

Here's a hint BP. In the past 24 hours or so, the idea of a bankruptcy has gained traction; more senators have joined the call for the company to suspend its dividend; and President Obama has demanded BP cover all costs from the Gulf of Mexico spill, including the salaries of all oil-industry workers laid off because of the federal government's recently established 6-month ban on deepwater drilling.

In a way, BP was forced to make this statement. BP's fundamentals are strong. The company has a vast array of assets that generate a lot of profits. It carries low debt.

As BP put it:

BP faces this situation as a strong company. In March, we indicated that the company's cash inflows and outflows were balanced at an oil price of around $60/barrel. this was before the costs of the incident.

Under the current trading environment, we are generating significant additional cash flow. In addition, our gearing is currently below the bottom of our targeted range. Our asset base is strong and valuable, with more than 18 billion barrels of proved reserves and 63 billion barrels or resources as at the end of 2009.

Speculation and politics, not fundamentals, certainly helped pushed the share price down. (It's bounced back quite a bit today, in fact.) But that's not to say there aren't some real financial risks to BP. The loss of the dividend, even temporarily, would create havoc for the numerous pension funds holding BP stock and most certainly drive out investors. And if BP agrees to meet Obama's most recent demand, the company could be on the hook for up to $330 million a month in additional lost wages claims.

Photo of oil taken in the Gulf from the Sierra Club, CC 2.0 Related:

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