BP Deepwater Horizon Oil Spill Crisis: Financial Analysis And Share Price Performance

Financial analysis was the third element of my primary research on BP 2010 Deepwater Horizon Oil Spill Crisis. The financial analysis results are summarised according to the three periods throughout the crisis – Early Period (Victims Cluster) – April-October 2010, Shareholders/ Investors Period – April-December 2012 and Strategic Shift Period – February-August 2013.

Early Period (Victims Cluster) – April 2010-October 2010

The figure below shows BP’s results on the New York Stock exchange (NYSE:BP) for the period between April 20, 2010 and October 29, 2010. During this period BP hit the bottom on June 25, 2010 with $27.02 per share. However, very quickly after this date (20 days later) the share price rose again, reaching $38.92 per share on July 15, 2010. It continued to grow until the beginning of August, scoring $41.33 on August 6, 2010. After that the share price fell slightly in the second half of the month. In September, however, it started to grow again reaching its highest price of $41.95 on October 1, 2010, still $19.53 less than on the night of the incident – $60.48.

 

NYSE: BP – April 20, 2010 – October 29, 2010 (Yahoo Finance)

NYSE: BP – April 20, 2010 – October 29, 2010 (Yahoo Finance)

The reason for the slightly recovoring of the share price was BP’s decision to replace it’s British CEO Tony Hayward, who was a dead man walking, with the American Robert Dudley. The crisis communicator plays a crucial role as they are the face of the company during the crisis and the bond between the company and its external stakeholders; and it is the stakeholders’ trust in the company that allows it to continue as a business. That is why the appointment of an appropriate crisis communicator was crucial for the survival of BP. With this decision, the company made a step in the right direction and started to take control of the situation.

Shareholders/ Investors Period – April 2012-December 2012

During the Shareholders/ Investors period, BP shares remained high in the first month and a half and after that fell from $45.34 on April 2, 2012 to $36.46 on May 31, 2012; however this was still very far from the bottom the price hit in June 2010 with $27.02 per share. Between June 4, 2012 and November 16, 2012 the share price rose and fell in almost proportionally. These results do not show any indication that BP was fined by SEC for lying about the amount of oil spilled in the Gulf of Mexico. After November 15, 2012 when the company signed a settlement with the Department of Justice, the share price rose. These results show media coverage doesn’t affect the share price significantly. Therefore, investors and shareholders are not directly influenced by the position of this stakeholder group.

 

NYSE: BP – April 02, 2012 – December 28, 2012 (Yahoo Finance)

NYSE: BP – April 02, 2012 – December 28, 2012 (Yahoo Finance)

Strategic Shift Period – February 2013-August 2013

In the last period of the crisis, the share price went through more drastic movements than the share price since the previous period, but it still remained stable. Since January 29, 2013 ($45.21) the share price was falling continuously to $40.19 on March 13, 2013. After that period it fell and rose again until April 17, 2013 when again fell to $40.23. Between May and July, 2013 the share price remained stable staying around $44. After July 25, however, it started to fall again and on August 21, hit $40.53 per share. The reason was BP’s decision to sign a compensations settlement agreement with The American Federal Government and Department of Justice, opening itself to uncontrollable payments. This broke the trust of its stakeholders who started suing and abandoning the company.

NYSE: BP – January 15, 2013 – August 23, 2013 (Yahoo Finance)

NYSE: BP – January 15, 2013 – August 23, 2013 (Yahoo Finance)

The results of the financial analysis proved the share price was not influenced by the media coverage. The figure below compares the media coverage score with BP’s share price performance throughout the three periods of the crisis. An interesting fact to be noted is that the share price was following the media coverage score only in the first five months of the disaster. After that the two lines went in completely different directions. This proves investors and shareholders are not influenced by the media; so BP should have communicated with its investors and shareholders directly, instead of using the media as an intermediary. It might have been used as an intermediary when the victims were definitive stakeholders as it the results showed the media was a bigger influencer for them.

Media Coverage vs Share Price

Media Coverage vs Share Price

Lidiya Kirilova

 

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