A drop in a large bucket

NEW YORK - BP holds enough oil in its reserves to single-handedly supply the United States for two years. It has little debt for a company of its size and makes more money than Apple and Google combined.

So when the White House this week arm-twisted its executives into setting aside $20 billion for the company's gulf oil spill, investors weren't worried it would bankrupt BP P.L.C. They barely batted an eye.

"The U.S. government will become insolvent before BP does," said Bruce Lanni, a stock analyst with Nollenberg Capital Partners.

Sure, BP stock has crumpled in half in a matter of weeks, and creditors are demanding higher interest to lend money to the company. But this time it's not some inscrutable, high-flying Wall Street bank in trouble.

BP posted nearly $17 billion in profit from its vast operations around the globe last year, compared with $8.2 billion for Apple and $6.5 billion for Google. The oil company had revenue last year of $239 billion.

And it has 18 billion barrels of oil in proven reserves, twice what the U.S. consumes every year.

BP has spent about $1.8 billion on the spill so far, but that's just the first drop in a very large bucket. If BP faces criminal charges, for instance, it could end up having to pay tens of billions in legal costs alone.

Analyst estimates of BP's total cost from the spill range from $17 billion to $60 billion. If the worst predictions about the leak come true, that figure could surpass $100 billion, based on a Goldman Sachs estimate that each barrel of oil spilled could wind up costing as much as $40,000 in cleanup and compensation.

Such a big bill, even at the lower end of the estimates, would drive many companies into bankruptcy. But analysts said BP probably won't have to go to that extreme unless it wants to wall off liabilities from the rest of its operations to attract potential suitors.

Under Wednesday's deal with the Obama administration, BP will suspend its dividend for the rest of 2010, freeing up $8 billion. The company also plans to raise $10 billion from selling some assets. Add cash in bank accounts and in short-term investments and BP could raise $25 billion without breaking much of a sweat.

BP also has relatively little debt for a company of its size. That means it has plenty of wiggle room to borrow. In fact, it already has lined up $10 billion with banks if it needs it.

The caveat: If BP did need to issue bonds or take out a loan, it would have to pay above-market interest rates because the risks posed by the oil spill have tainted its credit rating.

Fear of the unknown has taken a toll on BP's stock.

With BP's deepwater well in the Gulf of Mexico still spewing oil two months after it exploded, trying to guess how much the company will have to cough up for cleanup and damages seems a fool's game.

And after watching other seemingly impregnable companies collapse over the last two years, investors are not in the mood for much uncertainty.

They have driven BP's stock price down 47 percent since the April 20 explosion in the gulf, wiping out $87 billion in shareholder wealth. The shares closed Friday at $31.76 on the New York Stock Exchange compared with $60.48 on April 20.

"It's overdone," said Philip Adams of Gimme Credit. And Fadel Gheit of Oppenheimer & Co. captures BP's stock performance in one word: "Ridiculous."

Gheit predicts BP shares will rebound to $55 by the end of the next year.

But despite BP's enormous wealth, even bulls worry its stock might fall further. Among their concerns:

A sharp drop in oil prices. Oil falling from about $75 per barrel now to $60 or $55 "would be far more destabilizing to the company than any potential claim it might face in the gulf," Gheit said. If oil prices fell, BP would be more likely to explore selling itself to Exxon Mobil, Royal Dutch Shell, or Chevron, or at least divest its U.S. operations, analysts said.

Washington could restrict BP in the United States. But Alex Morris of brokerage firm Raymond James & Associates Inc. said he expected politicians to be careful meting out punishment because the dependency between the United States and the company is mutual, given the country's oil addiction.

Hurricane trouble. If BP doesn't plug the leak soon, it runs the risk that a big storm during hurricane season this summer will wash more oil ashore and add to damages, Argus Research analyst Phil Weiss said.