Optimistic BP fails to weigh the chances of being rebuffed in the US . . .

There is no doubt that BP is a radically changed business, I'm just not sure the company's management realises it.

The message accompanying yesterday's half yearly report was that once BP has cleaned up the oil spill, paid its bills and promised not to do something similar again, then it's back to business as usual, drilling holes in the Gulf of Mexico and pumping oil.
That could happen. But the next time BP asks permission to drill a deep water well in the Gulf I imagine the chances of the answer being "No" are reasonably high. But no allowance is being made for that. The company tells me, with complete confidence, that its future in the Gulf is assured based on a "good dialogue" with the White House. If President Barack Obama has told BP it's fine to carry on with new deep sea drilling in the Gulf then that's undoubtedly going to be a huge boost to the company's operations and its share price, but I think we should be formally told that's the situation.

There'll be plenty of people, other than BP shareholders, who would be keen to hear that news confirmed too – be they residents and workers on the Gulf coastline, members of Congress or oil industry regulators.
If nothing else, BP's position assumes that the outcome of the long list of official investigations into the tragedy will collectively conclude it can proceed. Some would say that's presumptuous.
But if you assume, as I do, that there's a reasonable chance BP could find itself frustrated in the Gulf then that has serious implications. If BP is turned down in the Gulf then other US drilling authorities will naturally think twice. They will be faced with the choice of either granting BP further drilling rights or joining the regulatory club in saying "No". In my experience regulators in these circumstances tend to be highly risk averse, not wanting to be the regulator who lets BP drill – only to risk another accident happening. And BP does have form in this area. On August 17 2005, following the Texas city refinery blast that killed 15, Lord Browne, the then chief executive, said: "The Texas city explosion was the worst tragedy in the recent history of BP, and we will do everything possible to ensure nothing like it happens again."
Yesterday Carl-Henric Svanberg, BP chairman, said: "The tragedy of the Macondo well explosion and subsequent environmental damage has been a watershed incident," adding that BP would be "…a different company going forward, requiring fresh leadership supported by robust governance and a very engaged board."
We've been here before and people are tired of it. I could be over reacting to the outcome of another 11 deaths and the worst oil spill in US history but at least I'm admitting the possibility that BP might not have it all its own way in the US in future, which BP certainly is not.
. . . BUT ACCEPTS AN END TO EXXON CHALLENGE
Even if BP is in denial about the risks to its future in the US it does admit that its previous narrative for describing its ambitions, closing the stockmarket value gap between itself and its great rival Exxon Mobil, is now over.
It was that target that personally drove Tony Hayward, the outgoing chief executive, and formed the drum beat of the company's culture at the top.
That dynamism driving the company forward can't now be delivered, or at least can't be revisited for years to come. BP is in rebuilding mode, albeit there's obviously debate about how fundamental and deep that rebuilding will have to be.
But BP's story is now more muted for sure. Readers who took my advice and bought at 355p are comfortably in the money and should make more as the company returns to dividend payments in 2011. But whether BP will ever be viewed as a growth stock, or simply a high yielding income stock, remains to be seen.

Damian Reece, The Telegraph 28-07-2010

Consort Money

Writers name

Damian Reece, The Telegraph

Advertisers Company:

Consort24

Advertiser's website:

http://www.consort24.com