How do you win the favor of an angry god?
The traditional answer is to sacrifice. When Artemis was angry with Agamemnon and prevented his army from sailing to Troy, he sacrificed his daughter and gained the goddess’ favor. I mentioned how BP had angered the energy gods by its hubris yesterday. It seems that today they sacrificed their equity investors by suspending their dividend.
But it’s only a token sacrifice. The company earned $8 billion in the first quarter and had planned to pay $2.6 billion in dividends. They’ve agreed to put just over $1 billion a quarter into a special fund for claims. That’s not even half what they normally pay to equity investors.
The company isn’t going to sell any of its crown jewels, like the Prudhoe Bay oil field in Alaska. And they’re not cutting staff or freezing salaries. Instead, they’re diverting some of their excess to this fund. And by agreeing to contribute to the fund over four years, they make the fund claimants their partners, not their adversaries, just as the Tobacco companies did 10 years ago.
But the gods aren’t so easily fooled. If an ancient deity wasn’t satisfied, he could continue to persecute. If the slick continues to grow, lightning bolts will fly.
Douglas R. Tengdin, CFA
Chief Investment Officer
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