We have a hunch that the actual gulf oil leak financial damages to BP and Transocean will be far less than what the market has stripped from both companies market caps (about $40 billion and $10 billion, for $50 billion), even including longer-term effects.
We feel late to the game on this idea, but actually the trade is still wide open. Neither of the two names have rebounded, and in fact they’re both at lows since the crisis happened.
Plus, this just came out from Platts:
The rhetoric is huge, but it seems hard to imagine the actual damages will play out as the market worries. Here’s a starter for the next step… how much of the potential damages will be covered by insurance for the two companies? If you get a good answer, then it could be a go.
Note: The author does not own securities related to BP or RIG, but investors he speaks or works with may.
(If you can’t see the charts, find them here)