Hello. Welcome to Company Focus. My name is Aamer Nawid. I'm an Analyst at Fat Prophets and today we're going to be taking a look at BP.

With over a third of its market capitalisation having been wiped off over the last six weeks there is no company more under the spotlight than BP is right now. The shares are of massive importance to us all. It produced £15bn for the UK's public coffers over the last couple of years. Its dividends account for around about a sixth of all dividends emanating from the FTSE 100, so a very important company, but where to now for the company and its share price?

Well looking at the charts here, there has been some heavy selling and some investors clearly believe that BP is going to run out of money. But to address this, the White House and BP have come out to say it has got more than enough in the locker to actually deal with the clean up costs and resultant compensation claims. In fact, a week into this spill, the company actually released robust results showing increased cash flows and reduced gearing, so a stronger balance sheet.

The exact sort of costs of the spill won't be determined for obviously quite some time, but estimates are coming out thick and fast. So far, we've just gone through the $1bn mark and in my view I think these could easily exceed overall $10bn to $15bn.

Looking back to Exxon Valdez of 1989, it's a different situation but Exxon incurred costs, clean up costs, of $2bn and $1bn worth of criminal and civil related costs. Initial punitive claims were around about $5bn for Exxon, but these were subsequently reduced.

There has been a whole host of estimates for the current cost of this spill, but analysts I think are all in accordance that the £40bn or the $65bn total cost will fall quite some way short of that.

Investors are clearly scared that the spill is worse than is currently being made out. Remember, BP has taken a lot of flack because they initially estimated 5,000 barrels of oil per day as the leak. However, since then, the US government came along and pushed that up to 12, 000 to 19,000 and there has also been some estimates of even higher than that. If investors can dismiss or get over the fact that these higher estimates won't materialise, then I think the negative sentiment towards BP shares will start to ease and you could potentially see the share price tick on up.

Remember, the company has been the subject of huge press spotlight and media attention. Now the words coming from the White House have been very strong. The headlines have been sensational, so I think this level of bearish sentiment is quite often associated with opportunities for value based investors. Remember, Exxon, again 1989, did take its time to recover but it did recover nonetheless.

But having said that, there is no taking away from the gravity of the situation. I think the spill will basically result in increased regulation for offshore drilling activity. Whether it's increased equipment costs or personnel costs, there's going to be a huge sort of increase to the cost base particularly in the Gulf of Mexico where BP is a major player.

In addition to this, BP has incurred significant reputational damage. I think that this is not an isolated incident and it has come after the Texas City refinery explosion a couple of years ago and some pipeline fractures in Alaska. So it's not an isolated incident. This is obviously going to add to the damage done to BP's reputation here.

Given that 40 per cent of its revenues emanate from the US and BP has had its reputation severely damaged in the United States, then I think this is obviously going to be a threat to earnings in the long-term.

Overall, I think the situation with BP is fairly messy. Investors will point to the robust balance sheet. They'll point to the fact that these are able to handle these costs. Doubters will point to the fact there are a significant amount of unknown variables. What is clear, the only thing certain is that there is going to be plenty of twists and turns. I think that investors will look back in the years to come and look back at the lows of the early summer of 2010 and think this was a missed opportunity.

Thanks for watching. Make sure you tune in again next week.