On BP, it's Simmons vs. Simmons

By Nin-Hai Tseng, reporter

FORTUNE -- Oil and gas industry insider Matt Simmons thinks BP will have to file for Chapter 11 imminently, but the Texas-based investment bank he founded has distanced itself from the oil guru and taken a starkly different position.

In a research report released June 11, Simmons & Co. International said spill-related liabilities are unlikely to force BP into bankruptcy. The report came just two days after Simmons, who retired from the firm as chairman last year, told Fortune that BP may have to file for bankruptcy within a month -- a prediction that helped drive BP shares down 16%.

Simmons & Co. upgraded BP (BP) stock from neutral to overweight -- essentially advising investors to buy shares of the embattled company that's still trying to plug a massive gush of oil spilling into the Gulf of Mexico. It estimated that BP's potential spill-related liabilities could reach between $18 billion to $90 billion, although it acknowledged it could take several years before the full extent of costs could be quantified and paid. Analysts said that the pace of spending will remain slow enough to allow BP sufficient liquidity to avoid bankruptcy.

A company spokesman said the firm does not have any equity position in BP.

The divergence of opinions between Simmons & Co. and its founder might seem puzzling. But it's not all too surprising, given that Simmons is no longer with the firm and is known as an outspoken (and sometimes controversial) industry expert who made a name for himself with his 2005 book, Twilight in the Desert: The Coming Saudi Oil Shock and the World Economy.

Still, the firm has struggled to separate its analysts' views from those of its founder, who has been making regular rounds on the media circuit since the spill. And what has transpired can only be described as an awkward distance between Simmons & Co. and Simmons himself.

"It's sort of hard to have his name on the door," said Anthony P. Banham, vice chairman of Simmons & Co., about Simmons' recent comments. "We respect his views but they're not the views of the firm."

At times, Simmons' remarks have compelled Simmons & Co. CEO and President Michael Frazier to actively remind corporate and institutional clients that Simmons no longer speaks for the firm.

In a note to clients sent May 12, Frazier wrote: "Several of the recent statements on the part of Mr. Simmons relating to the Macondo blowout and the implications for the industry and individual companies involved in this incident are discordant with the views of Simmons & Company International."

Simmons himself did not respond to requests for comment for this story, but he reportedly said he is embarrassed by his old firm for upgrading shares of BP.

He founded Simmons & Co. in the mid-1970s as a small bank focused on oil services and oversaw its expansion into energy banking, institutional sales, research and trading. In 2007, he formed the Ocean Energy Institute, a think tank and venture capital fund focused on challenges of U.S. offshore renewable energy. To top of page

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