Schroders' Andy Brough has dismissed concerns BP has become a takeover target or will be forced to cut its dividend, labelling investor reaction to the Gulf of Mexico disaster as "mad".
Brough, manager of the £1.71bn Schroder UK Mid 250 fund, believes the $75bn wiped off the market value of BP in the last few weeks has been an overreaction, especially considering costs up to this point are only $1bn.
"The world has gone mad on BP," Brough told Bloomberg.
"Under the 1990 Oil Protection Act, you have to split the cost whoever is involved. There are three people on this rig; BP's share is 65%. Let's say they cannot fix it for the next 120 days, and that runs at $60m a day, that comes to $7.2bn.
"Let's just say BP had to pay a $25bn fine. Gearing goes from 20% to 30%, which is within its specified range.
"This is just everyone jumping on the bandwagon. Louisiana shrimp farmers holding up dirty shrimps and oil covered pelicans, it is very emotive and it is very sad. But BP will survive this."
While the backlash to the disaster has led to many calls for BP to cut its dividend, Brough says the payout is safe, even if it had to pay a fine of $25bn. He also dismissed speculation the oil giant could not survive the crisis in its current form.
"I think it will survive it alone. When BP last cut its dividend it had gearing of 100%, this time around it only has gearing of 20%. Even if it has to pay $25bn, the cashflow of BP is very strong," he adds.
"Do not forget Anadarko is on this well also, they are an American company, are they going to be banned from pay in a dividend? Is anyone else involved going to be banned from paying a dividend?
"Will BP have to sell its American assets; this is something we do not know. But, I am sure the British Government is going to say ‘hold on a minute, one pound in every seven pounds of dividend in the London market is received from BP'."
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