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BP Oil Spills Effects Spread to Other Companies__» (Part 2)

As the massive oil spill in the Gulf of Mexico continues to spread and affects both commerce and the environment, we’ve been taking a look at the disclosures companies are making. This morning we looked at concerns disclosed by companies (other than BP) within the oil sector. In this post, we’ll include some of the disclosures from companies in other sectors.

Validus Holdings Ltd. (VR), a reinsurance company (it sells insurance protection to insurance companies) that provides coverage to property and shipping industries, filed an 8-K and press release on April 30 with loss estimates, one of the few companies so far to put a dollar figure on the spill. It stated: “Based on an industry loss estimate of $1.3 billion, Validus expects its losses to be in the range of $38 million to $45 million. These loss estimates are net of reinstatement premiums, reinsurance, retrocessional and other recoveries.” Validus added that the loss is “well within [its] expected large loss load for the quarter and the company has additional reinsurance in place if the ultimate industry loss increases above the current estimate.” It added, though, that its actual losses might “vary materially” from its estimates.

Companies that depend on tourism for revenues are also bracing for losses.

For example, in the 10-Q that West Marine, Inc. (WMAR) filed on May 12, the company, which sells boats and boat-related products and services, said that the oil spill in the Gulf of Mexico may have a “substantial impact on boating usage in the area.” The company has more than 300 stores in 38 states, Canada, and Puerto Rico, and it appears from its website that about a third of those stores are located in states with Gulf coastlines. West Marine explained that “As we are entering into peak boating season, the continuing underwater leaks and resulting oil spill may have adverse effects on our results of operations by reducing demand for our marine products….”

Grocery chain Winn Dixie Stores, Inc. (WINN) filed a 10-Q on May 10 which noted that revenues in the fishing, tourism, and shipping industries are likely to suffer. Winn Dixie’s filing stated: “We have stores in the Gulf Coast region, on the west coast of Florida and the Florida Keys. A decrease in tourism in these areas as a result of the spill may have a negative impact on our sales in these locations.” Winn Dixie is also trying to reassure customers that the seafood it sells is safe. Its website now has a page with a letter to customers stating, in part: “We understand that you may have concerns due to the recent oil spill, so we want to remind you that, as always, all of our seafood is checked by local inspectors before it comes into our warehouse. It is then checked again by our local Seafood Associates before it is placed on display for sale.” Given today’s news that tar balls are now washing up on Florida’s shores (although tests are underway to confirm that they originated from the BP spill), it seems likely that the accident will harm a wider geographical area than BP first predicted, and that Winn Dixie’s concerns are justified.

Hibernia Homestead Bancorp (HIBE), a bank that serves the New Orleans metropolitan area, filed a 10-Q on May 17 which reported that the company is currently evaluating the “potential effects” on its customers. It added, “The future effects of the oil spill could impact the Company and our earnings, but until more is known about the magnitude of the situation, it is premature to reasonably determine the impact on the Bank’s loan portfolio.”

BP filed another 6-K update on the oil spill just yesterday to report its efforts to stop the leak, drill “relief wells” (which it says will take “some three months to complete from the commencement of drilling”), and contain and recover the oil that is spreading. It states that over 650 vessels are involved in the recovery effort, that it has recovered 6.3 million gallons of “oily liquid”, and that

“…over 19,000 personnel from BP, other companies and government agencies are currently involved in the response to this incident. So far 15,000 claims have been filed and 2,600 have already been paid. BP has also received almost 60,000 calls into its help lines.”

Clearly, the oil spill will continue to have a great impact on the Gulf area, its businesses, and its residents. It’s also apparent that the claims for losses will be both numerous and costly.

From time to time, we’ll continue to watch as companies update their filings and disclose how the oil spill is affecting them.

Image source: IBRRC via Flickr