BP May Disappear While Trudging Through Its Own Sludge

Despite the travesty that has occurred, I am sure that most people reading this will sneer when I state that the stock was over-sold a long time ago and the economics even based on the worst scenario make the current price ridiculous. Nevertheless, BP made its bed of muck and now must sleep in it. Indeed the low stock price may put the company to rest regardless of the outcome of its latest attempts to rectify a catastrophic wrong.

Our architectural practice has completed many complex projects for Fortune 100 companies, every branch of the military and every level of government. We are very proud to say that after 30 years we still have a zero-loss record achieved through the best practices of risk management. We have also observed the best practices of major companies and institutions during this time.

One of the basics of any business is safety first. To this end the best companies not only have very strict procedures but they have a team of safety managers enforcing them. And here is the key to making this work. The safety managers report directly to the board and do not have to answer to, or be influenced by pressures from middle management. I do not believe from what we have learned to date that BP could be doing this and still end up making the decisions that they did.

Getting back to the stock price, panic selling has driven the shares to the depths of the ocean floor. Perhaps that is to be expected since bad news is being piled on bad news with no end in sight but financially I remain blind. I don't see how a company that could earn $30 billion in a single year can be valued so low. BP earned $6.08 billion in the quarter and has not reached $1 billion in clean-up cost yet. While most recent estimates I have heard place the eventual cost in the neighborhood of $10 billion, even if it were $20 billion over the next few years the stock is a screaming bargain.

However, with all rational calculations being thrown out, pundits on the street are already postulating that the stock is so low that it might be acquired by a stronger company that's thinking the time is near to swoop in and take advantage of BP's weakness.

The P/E at 6.0 has almost dropped to half the market average of competitors Exxon Mobile (XOM) and Conoco Philips (COP) and only a third of the over-all market. The company has lost $70 billion of market value based strictly on fear, not financials. It is clear BP may be having trouble cleaning up the Gulf oil spill, but others may clean up by stealing the stock or the company in broad daylight.

Sheldon Liber is the CEO of a small private investment company and the principal for design and research at an architecture & planning firm. He writes the columns Chasing Value and Serious Money. Disclosure: He own shares and options of BP and RIG.