Wednesday, June 30, 2010
BP recently provided Florida with $25 million for the state to use to advertise to supposedly combat the negative "perception" potential tourists had of the state.
The alleged use of the funds was to counter the negative press which could cause people to visit elsewhere.
Now the CEO of a Florida public-private marketing corporation is whining to Charlie Crist's Gulf Oil Spill Economic Recovery Task Force that not only the $25 million running low, but they need an additional $500 million from BP to continue their positive marketing campaign (which would include other states in the Gulf).
I think this person also said this with a straight face. A great acting job if that was the case.
This is an obvious abuse of the purpose of the escrow fund, which is what they're attempting to tap into. Could you imagine Gulf states being awarded $500 million of the $5 billion allocated in the fund this year for advertising?
It's also unclear how much the private sector participants in this "public-private" marketing corporation would get from it, but it's sure to be a lot, as would the government entities involved on the state and local levels.
This continued idiocy must be stopped in its tracks in order for the idea that BP has the ability to pay unlimited liability in these circumstances to be arrested. It doesn't. And if these types of requests continue to be made, it's sure to lead them to declare bankruptcy in order to manage and limit the payouts.
It also smells of governments trying to take advantage of the situation and use BP as a form of tax revenue to prop up their government programs they can't afford; such as the tourism unit.
BP executive Darryl Willis, vice president of resources at the company, said states should contact BP's chief operating officer of exploration and production, Doug Suttles, concerning the issue, and not attempt to go through the claims process to attempt to secure advertising money.
The hangover from the recession and mortgage crisis is a large part of what is driving these politicians and businesses, and these types of attempts to be opportunists to extract more money from BP will backfire, as they simply don't have the money to continue on meeting these types of requests.
Alan Levine, head of the department, sent a letter to BP's Chief Operating Officer Doug Suttles, saying this about the matter, "There exists anger, anxiety and uncertainty among the families and communities affected by the spill, which will easily manifest into addiction and various forms of mental health crisis if not confronted."
BP is said to be reviewing this request, which seems to be bogus to me. You could make the same claim about any situation in life that causes stress, and the recession over the last couple of years, along with the mortgage crisis associated with it was another.
Should the government, businesses and other institutions pay for every situation in life that causes some type of stress?
This all sounds like an underfunded government agency looking for any place to get some funding in order to keep their jobs, not a legitimate request for victims.
According to BP, they're offering cash back to their distributors for every gallon of gas they sell at the stations. Along the Gulf coast it's set at 2 cents a gallon and in the Midwest and East it's 1 cent a gallon.
Other help will come in the form of increased national advertising and a reduction in fees for credit card use.
The program for cash to distributors will operate from June through August. Costs for BP will be from about $50 million to $70 million over that time. Distributors are allowed to use the additional cash for whatever use they want.
BP said they're reevaluate the program as events change over time. For sure it'll go through August though.
Tuesday, June 29, 2010
This bill is just for the basics, it does not include any of the long term estimates for the fuel cleanup, equipment costs, or the cost of the city's environmental consultant. This is just the first of many more bills to come. The breakdown of the expenses is, $53,000 for water cleanup teams, $12,000 for police security, $9,000 was added on by the Mayor's office, as well as $33,000 for firefighter efforts to contain the oil.
Chevron has maintained from the beginning that they would pay for all costs associated with the oil spill. Oil skimming is continuing along the Jordon River. The effects to aquatic wildlife seems to be minimal although the long term effects are still unknown. There have been several hundred waterfowl, the majority being geese who have been cleaned of the oil and released into Clear Lake. Officials said that less than 10 of the treated birds have died.
So far, crews have gotten about 610 barrels of the 800 barrels that were spilled by Chevron's pipeline. The cause of the break is still unknown but under investigation. The oil pipeline has been repaired and is fully operational again.
The S&P saw another decline of 0.1 percent to 1,074.57, while the energy shares among S&P tumbled 1.3 percent as a group - this being the highest loss among 10 industries. While the Dow Jones Industrial average also slide losing 0.1 percent or 5.29 point to 10,138.52. Crude oil fell below $78 a barrel in New York, this is due to slow economic growth concerns that this may reduce demand.
Exxon Mobil dropped 1.39 percent to $57.65. While Royal Dutch Shell saw a decline of 2.9 percent to $49.56, and BP saw a gain of 0.96 percent to 27.31.
Meanwhile, many are watching with worry and anticipation as Alex continues it's course towards the Gulf as swells are already reaching it. It is expected to turn into a hurricane and the force of the storm is already causing evacuations on several of the oil rigs. Air Logistics, an offshore helicopter company has been evacuating Gulf workers in the Western Gulf of Mexico.
Shell is planning on shutting down production today on their rigs in the central and Western Gulf. Exxon has also started the process of evacuation from the offshore facilities that are expected to be in the path of Alex.
Monday, June 28, 2010
Oil Company Executives Leave Meeting With Salazar Disappointed: BP (NYSE:BP), Exxon (NYSE:XOM), Transocean (NYSE:RIG), Chevron (NYSE:CVX),
The purpose of this meeting was to lift the moratorium imposed by President Obama. Everybody left disappointed as Salazar refused to make any promises that the government would lift the Deep water drilling ban. Kendra Barkoff, Interior spokeswoman confirmed the meeting took place but refused to comment on the contents of the meeting itself.
"Numerous operators told Secretary Salazar that they were in the final stages of moving rigs, deepwater rigs out of the Gulf of Mexico and to West Africa or the Middle East. We were frankly disappointed at the lack of serious attention that was paid by the department of the Interior on the horrible economic impact that the Department of Interior's policies are having on the industry and on communities along the Gulf Coast, " said a source close to the matter.
In letters to the executives of these oil and gas companies, House Democrats questioned if their oil response plans "were adequate to protect the Gulf region from the consequences of a sub sea blowout similar to the blowout" that BP experienced at the Macondo well.
Shell will be paying reduced fees for the leasing of Noble's rigs in the Gulf of Mexico. They have also given Shell the full right to cancel any contracts between the two rigs currently in the Gulf. Due to President Obama's six month moratorium on deepwater drilling.
The agreements are contingent upon Noble closing the deal with Frontier. Upon doing so, Shell will have the go ahead for the two ultra deepwater projects according to the terms of the contract. Anadarko pulled out of their contract with Noble in the beginning of June from drilling contracts due to the moratorium.
John Breed, a Noble spokesman said the purpose of the Shell purchase is to hopefully ease concerns and prevent oil companies from fully abandoning agreements in the Gulf. " We're working with our customers to find a resolution that would allow them to keep rigs under contract," said Breed.
After watching BP's stock plummet 6 percent, a 14 year low on Friday, today BP's shares saw an increase in premarket oil trading of 2 percent. That's a total loss in market value of over $100 billion dollars. BP was adamant in denying the fact that Tony Hayward, their chief executive was resigning. This rumor stemmed from a Russia state RIA Novositi news agency reported that a senior Russian Cabinet official said that Hayward was going to be resigning from his position at BP.
"Hayward is leaving his post, he will introduce his successor," said Sechin quoted by RIA Novosti. There is denial all around, from BP spokeswoman Carolyn Copland in London said it, "is definitely not correct." Also of London, Sheila Williams stated, " Tony Hayward remains chief executive." Mark Proegler, the U.S. BP spokesman said, "they are mistaken."
"I'm sure there has been a misunderstanding. Hayward's resignation at this time and in this place lacks logic. It would make sense that Hayward would finish his job tackling the oil spill and step down afterwards so the new CEO wouldn't have his burden on his shoulders, " said Konstantin Cherepanov oil analyst from the Swiss Investment Bank UBS.
The reasoning is the extensive dilution of earnings the company should experience as a result of buying XTO.
Goldman maintains a "Neutral" rating on ExxonMobil, along with a $65 price target.
This is the largest deal made by a Chinese company in the Canadian sands, and was acquired for $4.65 billion.
This accounts for almost half of the strategy of ConocoPhillips to sell off assets worth close to $10 billion by 2011.
"I have approved the application by Sinopec ... to acquire control of the ConocoPhillips Partnership because I am satisfied that the investment is likely to be of net benefit to Canada," Canadian Industry Minister Tony Clement said in a statement Friday.
Sinopec is the top refiner in China, as well as the second largest producer of oil.
Sunday, June 27, 2010
There are over 11,000 gas stations across the U.S. that sell the fuel under BP's name like Amoco and Arco. BP owns a very minute amount of these. Gas station owners in Illinois and Georgia are saying that over that last several weeks they've seen sales decrease 10 percent to 40 percent.
John Kleine, the executive director of the independent BP Amoco Marketers Association who represent hundreds of distributors said, gas distributors and gas station owners requested to BP officials that they get help with the cost of more advertising geared towards motorist. As well as giving them a cost break on the purchasing of gas.
Bob Junkniess, an owner of a BP gas station said, " They have got to be more competitive on their fuel costs to the retailers so we can be competitive on the street, and bring back customers that we've lost." He said he's seen a decline in sales of 20 percent, he has 10 BP stations he owns.
The class action lawsuit is on behalf of all restaurants in the seafood industry that have experienced losses and damage caused by the explosion of the Deepwater Horizon Rig on April 20th. The 18 page complaint was filed in Federal Court on Friday.
Serena Pollace, Spicer's lawyer said that due to the oil spill they are expecting to lose customers because of contamination fears, higher prices, lower tourism, and the lack of availability of local seafood. " Much of the plaintiffs business is based on the unique quality of Louisiana seafood as well as the chain of delivery of that resource from the initial harvester. Because this chain of delivery cannot be maintained, plaintiffs business has been and continues to be, materially damaged," said Pollace.
The lawsuit also names as defendants, Transocean who operated the rig, Cameron who provided the blowout preventer, and Halliburton that provided the cementing services. The lawsuit is seeking compensatory and punitive damages from BP.
"My expectation is that we will go forward with it but it needs some changes. It's clear, now some of the findings are coming out, that the oil response side has got some weaknesses and we as an industry have to come together in order to actually be better prepared in the future," said Voser.
Due to the worst oil spill in history, President Obama put into play a six month moratorium on all deep water drilling. This was put into place in May and was only supposed to last through that month and be effective on any new deep water drilling. As the month of May came to a close, that is when Obama extended the moratorium to six months and made it effective on all drilling rigs in the Gulf.
Voser said, "we have got other safety procedures across the globe. But I think again that for some companies, there will be some learning in this that needs to be adapted. Safety and design features need to be constantly improved. By doing so we can actually prevent these kinds of things from happening much more and I think that's where we need to drive it even further on the global scale."
Saturday, June 26, 2010
Energy companies are also feeling the effects and worldwide have sold a total of $29.1 billion in bonds since April 20th when BP's leased rig blew up. On Monday, Royal Dutch Shell sold a total of $2.75 billion in bonds. Shell had no comment as to why or on the timing of their sale.
Andrew Karp, head of investment grade bond syndicate at the Bank of America Merrill Lynch, said that there was a high demand for the debt sales. According to Standard & Poors 500 the oil and gas sector credit spread has increased from 2.43 percent on April 28th to on Thursday reaching 3,35 percentage points.
This normally would put off borrowers until costs came down. Oil companies are borrowing while they can. Justin D'Ercole, head of America's Investment grade syndicate at the Barclays Capital said, "in late July if there's noise that the relief wells aren't working, the energy space could be a lot wider and oil companies will likely try to get ahead of that."
Williams was the vice president of Exxon Mobil Development Co. Keith Hutton, former chief executive will be the new vice president. XTO will keep their name as well as "nearly all" of the current 3,300 employees, said Exxon. The officials at Exxon are expecting there to be quite a substantial growth in the demand of natural gas.
Williams said, "with this agreement, we are combining XTO's skills, capabilities, and asset base with Exxon Mobil's advanced research and development, and operational capabilities global scale and financial capacity." Exxon is planning on developing XTO into a global company which will explore and develop "unconventional" resources.
Rex Tillerson, Exxon chief executive said, "Exxon Mobil's energy outlook indicates that gas will grow more rapidly than any other major energy source given its availability and relatively low carbon profile."
Senator Bill Nelson of Florida stated, "the greatest nightmare with this storm approaching is that it takes this oil on the surface of the Gulf and blows it over the barrier islands into the bays and the estuaries. And that is where you really get the enormous destruction, because it's just very difficult to clean up those pristine bays."
Alex's current course is heading West-Northwest and has sustained winds of 40 miles per hour and is about 250 miles from Chetumal, Mexico. As of now it does not appear that Alex path will take it directly over the massive oil slick, but as with any storm there is no predictability and their paths can change from hour to hour.
Meteorologist Karen Magginis says the "preferred scenario" for Alex to head to Northern Florida. The reasoning for this is because the oil has been slowly rotating counterclockwise. If Alex goes towards the East of it, it would send the oil out to sea. If the storms path goes directly towards the Gulf and Louisiana, it will cause the oil slick to be pushed towards Florida.
Magginis said, "we've never seen an oil spill that encompassed the Gulf like this before, end up do close to shore. We've never been in this situation before."
Friday, June 25, 2010
Oil Funds, Oil Options: Oil Companies Falling Short Exxon (NYSE:XOM), Shell (LSE:RDSA), Chevron (NYSE:CVX), ConocoPhillips (NYSE:COP), BP (NYSE:BP)
The tools being used in the BP oil cleanup in the Gulf of Mexico are pretty much the same tools that were used in the Exxon Valdez oil cleanup effort. Skimmers to collect the oil, booms to contain it, and the main weapon being used chemical dispersant's. Markey is proposing a bill that will broden oil options by using oil funds to the tune of $50 million being used to develop deep water drilling, and put it towards funding research for better oil spill clean up tools as well as new oil spill prevention methods.
Markey said, "the oil companies have been lying when they said they had the capacity to handle an emergency like the Deepwater Horizon spill. We can't afford to get stuck again without the tools to respond to a spill like the one we're seeing in the Gulf. It is clear that the oil companies have not created new solutions to keep their new drilling technologies safe."
The other thing that is causing renewed concern and placing pressure on BP stocks, is the pending development of a tropical storm. If this storm hits the Gulf of Mexico as predicted, it will cause possible large delays in the fuel containment efforts. Broker Nomura cut it projected BP price target from 593p to 465p.
Nomura said, "a heavy inversion of both credit yield and equity volatility suggests the market is concerned about a near term credit event around BP." BP stock fell to $26.96 a share losing another 6.1 percent. This beating their prior day low of $28.56, losing a total market value of almost 53 percent since April 20th.
"BP's market cap is eroding and its ability to finance itself in the capital market is impaired. It's anybodies guess what can happen but the fear of the market is that that liability could be so enormous that BP may have to seek bankruptcy protection," said Orr.
At this stage, what was decided was that the process was valid and Exxon could go forward with the claims process. In other words, it dealt solely with issues of jurisdiction in the matter and nothing else.
"The message to companies facing host-state interference with their assets is clear: cases associated with foreign investors like Exxon can gain the protection of international treaty law," said James Loftis, a partner in the international litigation practice at Vinson & Elkins.
In going forward, the amount of damages, along with the merit of the claims of Exxon are still to be determined, and the next part of the process will be to determine whether or not Venezuela will have to pay Exxon for confiscating their assets held in the country.
At the outset it looks like it's a nod toward fairness and sharing the costs in the project, but so many things have been admitted by BP, that it's questionable as to whether or not the two companies could be made to contribute.
Lawmakers of course know this. So why the new interest in them? It's the growing awareness that the mounting costs related to the spill could bring BP to its knees and force them to declare bankruptcy to protect itself from creditors and liabilities.
If BP is forced to go bankrupt, there is no one else left to pay, and if government officials attempted to push that on taxpayers, their already tenuous political futures would be in even more jeopardy. It isn't going to happen!
Even though this is a genuine disaster, there was too much political posturing in response to outrage over the situation, and in attempts to appease the people. Things were put into place too quickly without thinking it through clearly and thoroughly.
What that essentially means is it's all on BP, and the issue of payment and liability is completely on them alone. Although there are ancillary lawsuits the other companies will face, it isn't near the liability faced by BP.
The other problem is BP is the only one out of the three with the type of capital and insurance to handle the lawsuits and claims; or at least with a legitimate shot at it.
Concerning the $20 billion escrow fund, some politicians are looking at the four-year length of it, and are aware BP could end up not having enough to pay out into it over that period of time. That's where the interest in Anadarko and Mitsui come in.
Then take the liability of BP with the Clean Water Act, which if they are deemed as being grossly negligent in the accident, could pay as much as $4,300 a barrel of oil that's emptied into the Gulf.
Depending on that outcome, and also finding out what the actual amount of oil that has escaped into the Gulf is, the costs would be astronomical, with the potential to come in at $142 million a day. How long could BP handle that on top of all its other liabilities? They couldn't is the answer.
Whether people like it or not, if all they try to do is destroy this company, and if any type of lawsuit is allowed to go forward against them, it is highly unlikely they'll continue going on without going bankrupt.
Even adding the two co-owner oil companies to the liability list won't help much, as what they could pay would be a relative drop in the bucket in contrast to BP.
Like it or not, this is another one of those too big to fail moments, which no one has the guts to say concerning the disaster.
Unfortunately, it is the legitimate pursuit of BP in the circumstances which is bringing it all about, and laws which will penalize them beyond what any company could probably pay. All this and we've barely scratched the surface of overall liabilities, although we've touched on the larger ones.
Bottom line as the growing costs are revealed, are there is no way this company will be able to survive without going bankrupt, unless there are actions taken to alleviate their liability, which isn't going to happen, as it would be political suicide.
It looks like taxpayers will end up paying for some of this, as there is simply no way BP will be able to.
Thursday, June 24, 2010
Thad Allen, Coast Guard Admiral said the containment cap was removed by Transocean after an ROV hit the cap. The drillship Discoverer Enterprise was then moved off the site so that repair could begin. What happened was the ROV accidentally closed a vent which regulates the gas and oil flow and prevents pressure from building.
The vent closure than caused the pressure to build and hydrocarbons started bubbling up through the line which purpose is to inject warm water as oil is being brought to the surface. This water prevents hydrate crystals from forming and clogging the line.
When the Deepwater Rig exploded April 20th, the fund held over 19 million shares according to state Comptroller Thomas DiNopoli. DiNopoli has hired the law firm Cohen Milstein Sellers and Toll, he is the sole trustee of the $132.6 billion in the fund.
"BP mislead investors about its safety procedures and its ability to respond to events like the ongoing oil spill and we're going to hold it accountable," said DiNopoli.
One of the largest state pension funds is in Florida and holds $104 billion according to spokesman Dennis Mackee. "We're monitoring the lawsuit and all developments but we have not come to any decisions," said Mackee. The Florida pension fund covers close to 1 million active workers and retirees. They've seen a loss of almost $65 million on their BP investments.
At this time there is just too much to digest, and it'll have to be revealed incrementally, or it won't be absorbed or understood.
One of these is the insurance industry, whose rates would either be raised so high by insurance companies as to make it impossible for only the largest of companies to operate in the Gulf, eliminating competition and probably resulting in higher oil prices.
The other option would be for oil companies to insure themselves, which some are already doing.
As Moody's (NYSE:MCO) vice president senior credit officer, James Eck said, “What insurer is going to want to put out $1 billion worth of deepwater insurance and only get paid $5 to $10 million after this? They may as well write a few more hurricane-insurance contracts.”
In the early part of June, the cost of insurance policies covering oil rigs had already surged by 50 percent, and it's thought it'll rise by as much as 100 percent going forward.
Taking into account the entire global market, there isn't a large enough one to be able to insure drillers. At this time the annual premiums insurance companies collectively receive from the industry is $3 billion.
If the cap on liability is raised from $75 million to $10 billion, there is no insurance out their that could or would cover them. And this is just in the United States.
Premiums of course could be raised, but they would be so prohibitive as to make them irrelevant, as they couldn't be afforded to buy, and the insurance companies wouldn't survive if another catastrophic event were to happen.
That's why it's more than likely only several large oil companies could continue to drill in the Gulf by insuring themselves.
The only companies analysts see as being able to self-insure are BP, Exxon Mobil (NYSE:XOM) and Royal Dutch Shell (NYSE:RDS-A).
These three already insure themselves on a partial basis, and BP says it is less expensive in the current circumstance to pay as they go rather than to acquire policies outside of the company.
Self-insurance comes through wholly-owned units within the oil giants.
As you can see, this will cause a domino of events, which would force smaller drillers to leave the region, and an unknown amount of secondary events related to that which won't be known until it happens. From there it'll spread.
And that's just in this one area.
For insurance, there will be less of it for companies in the Gulf, and depending on the decisions on liability caps, it will drive out all but the very largest of oil companies.
Nothing after this will be the same in the Gulf of Mexico, and even in that regard regulations and responses around the world could change the industry even more.
How much all of this will be passed on to consumers in the form of higher prices is a ways off, but there is something that tells me we're not going to like it.
Paul says the costs should be born completely by BP, and taxpayers shouldn't have to foot any of the bill. Paul didn't comment on whether or not other oil companies should participate in the cleanup costs. The point he was making is those responsible should pay for it, and not the American people.
The Texas congressman also wants liability caps removed so there is no possibility more taxpayers will have to pay anything.
As far as slipping payouts into a bill, it's outrageous when you consider BP has already committed $5 billion on an annual basis for the next four years, and that's on top of the over $2 billion they've already paid for the cleanup and paying out of claims.
Wednesday, June 23, 2010
The reason for removing the cap after the robotic submarine hit it was because gas started rising through the vent, which carried warm water down to prevent the buildup of hardened crystals, which could form on the cap and disrupt the system.
While some reports said the oil was being released unabated into the Gulf, that's not true, as Coast Guard Adm. Thad Allen said the flow of oil has increased, but it's not a "totally unconstrained discharge."
The second system installed, which is used to burn off oil is reportedly still operating.
The system that is down does capture the most oil at this time.
Exxon Mobil dropped 1.9 percent to 61.94. While Chevron seen a decline of 2.3 percent taking them to 74. Then there Halliburton which slid 3.9 percent to 25.99.
Ben Halliburton, chief investment officer at Tradition Capital Management said, "it's a big negative for the industry if the moratorium is not lifted. Clearly, the companies impacted are going to have negative revisions on their earnings and their cash flows if they're involved in the deepwater Gulf."
The Nasdaq dropped 1.19 percent to 2261.80. While the Standard and Poors 500 saw a decline of 1.61 percent to 1095.31. All sectors of the S&P ended in the red lead by energy. The Dow Jones fell 1.43 percent to 10293.52, there largest one day loss since June 4th.
If the deal is given approval, Chevron will hold a 60 percent stake as well as being the operator. With BP's stake being the other 40 percent. Although if they were to find commercial oil and gas that would give China National Offshore Oil Corporation the right to take 51 percent stake.
Nobody would comment on the deal when spokesmen were contacted. Steve Westwell, BP's Global Chief of Staff said of course the oil spill will have a "profound effect" on the industry. He continued, despite the current situation they are dealing with it should not "stop all further deepwater production." Not to mention the fact that drilling in the Gulf of Mexico has had an impeccable safety record for the past 20 years.
Chevron is also currently bidding on two other blocks in South China.
The securities due in 2016 were at 5.95 percent, the decline of 2.7 cents brought it to 88.1 cents on the dollar, yielding 8.45 percent. The day before the spill April 19th, the notes traded at 110.9 cents and then fell to 87.5 cents on the dollar.
Robert Gwin, chief financial advisor for Anadarko said the downgrade, "is very disappointing and surprising in light of Anadarko's limited role as a non-operating investor in the Macondo well."
Brookfield's Levington said, "I think the credit markets have downgraded all of the spill companies by several notches. The ratings agencies are trying to catch up with what the markets have already done."
A judge lifted the moratorium, saying it was unprecedented in history, with no parameters or guidelines other than completely shutting everything down involved in the decision of Obama.
The arrogant president of the United States doesn't care, and immediately went on the offense against the people and businesses in the Gulf region by appealing the ruling of the federal judge.
A number of people say it could do more damage than the disaster itself to the people of the Gulf.
Tuesday, June 22, 2010
The complaint was submitted to the Judge by several businesses who provided many different services who are arguing the moratorium was arbitrarily imposed. In his ruling Feldman agreed, stating in his ruling that the Interior Department is assuming because one rig failed all rigs and companies involved with deepwater drilling are posing an imminent danger.
Feldman wrote, "an invalid agency decision to suspend drilling of wells in depths of over 500 feet simply cannot justify the immeasurable effect on the plaintiffs, the local economy, the Gulf region, and the critical present day aspect of the availability of domestic energy in this country."
The Interior Department's response to the lawsuit is simply, the moratorium is necessary while the continued attempts go on in the Gulf to stop the crude oil and cleanup the oil spill. "A second deepwater blowout could overwhelm the efforts to respond to the current disaster," said the Interior Department.
The White House said there will be an immediate appeal.
Shell has the most rigs in the Gulf that are now being effected by the deepwater drilling ban. The effect is causing Shell to face higher yield spreads causing investors considerable doubt to weather the government will further increase restrictions and regulations. Anadarko has yet to see if they will be required to pay their share of the oil spill disaster. Having a 25 percent stake, if it's found that they do have to pay they would be required to pay 25 percent of the oil cleanup costs.
Levington, a managing director of corporate credit at Brookfield in New York said, "it could delay the timely projects or possibly eliminate them. It could require additional monitoring and maintenance, all of which could hurt earnings, cash flow, and returns on oil invested capital."
The U.S. Public Pension fund has been struggling since last year, with a decline of 21 percent total investment losses. As of May 1 of this year, they held more than $300 million shares in BP. The largest U.S. Pension fund, Calpers at $210 billion, had a total of 58.2 million shares as of April 20th. This is more than any other state pension. They saw a decline from $585.7 million down to $301 million.
Brad Pacheco, a spokesman said, " Calpers has a well diversified portfolio and long term investment strategy to weather these ups and downs, even those caused by unusual circumstances such as this one. We will be engaging BP on corporate governance to discuss the impact of the crisis on the value of the company."
Anadarko, who owns a 25 percent stake in the well, would get hit the most of the two partners besides BP in the well, as Japanese oil giant Mitsui holds only a 10 percent stake, although that could end up costing billions if the worst case scenario is even close to playing out.
For now though, Anadarko is in the sights of BP, and they're pushing it as far as they can to get a decision made.
It may even be illegal for the two companies to litigate the dispute, as anything being fought over which is over $500,000 has been included in a provision of the partnership agreement, according to a regulatory filing by Anadarko.
This isn't to say it can't be litigated, but it does complicate the picture, and if the two entities trust those doing the arbitrating, it is a quicker and less expensive resolution to the problem.
The practicals of it are the existing containment cap will be removed and then replaced with a larger one, which not only can capture more oil, but also allow those vessels processing or burning off the gas and oil to disconnect and move to safer waters in case of a hurricane.
One important additional element of the new cap will be a sensor which should give a more accurate reading of rate the oil is actually leaking into the Gulf; something no one has yet to get a handle on.
Government scientists have estimated a daily oil leak of 35,000 to 60,000 barrels, while the worst-case scenario from BP is as high as 100,000 barrels of oil a day gushing into the Gulf.
Once the cap is in place, there will be another vessel included in the processing of the oil, which could capture up to 53,000 barrels a day.
By the middle of July, BP hopes to be able to capture up to 80,000 barrels of day if that much is actually spilling into the ocean.
So far BP has captured 231,190 barrels of oil since the cap system has been in place.
Monday, June 21, 2010
Connecticut's Attorney General, Richard Blumenthal said, "even without oil actually reaching the Connecticut shoreline, this massive oil spill could still impose damage and destruction to the entire Atlantic coastline." Marine life and birds are likely to be "severely damaged."
Blumenthal added, "Connecticut and a coalition of states are putting BP and affiliated companies on notice that we will not pay the price for their monumental failures." This request seems a little premature considering there has yet to be any damage or destruction done.
Meanwhile, the containment cap that BP is using to contain the oil on Sunday captured 14,570 barrels of oil. While using a secondary containment system to burn off oil, burned 8,720 barrels on Sunday. Between the two systems there is a daily average of 28,000 barrels being captured.
BP shares were down 4.4 percent to $30.34. That's almost a 50 percent drop from where they closed on April 20th. While Anadarko's shares saw a jump in trading of 1.3 percent.
Monday morning BP stated that the oil spill response had reached 2 billion. They said they've paid out over 32,000 claims of the more than 65,000 claims they've received. In excess of $105 million. In a statement BP said, "it is too early to quantify other potential costs and liabilities associated with the incident."
Mike Tosaw, investment advisor representative of Know Your Options Incorporated stated,
"over the short term we're not touching it with a 10 foot poll," although he does expect it to make it over the long term. Tosaw continues, "I personally am not putting my money where my mouth is on that. There's just too much uncertainty with it."
Concerns over their debt has increased the upfront costs of Anadarko by $100,000 since Friday, increasing to $400,000 overall for credit default swaps. That's in addition to the $500,000 it cost to ensure $10 million annually.
BP has been pushing their partners, Anadarko and Mitsui over sharing the financial burden, especially Anadarko, who is a 25 percent partner in the venture.
Anadarko claims they're relieved of responsibility because their agreement to share costs was broken because of the "gross negligence" of BP.
BP has sent a bill to Anadarko, which will probably take litigation to collect, assuming BP would win the case.
Wendell Guidry, the Transocean drilling superintendent that was on the rig said," its always, always on our mind." Work continues to press on around the clock. There are eight thrusters in place that keep the rig positioned correctly over the well. In the distance another rig is visible, it is siphoning oil and gas from the well and burning it. It appears the flames are coming down like a shower. There are ships surrounding this rig, their purpose is to hose of the deck to keep the heat from building.
Thad Allen, Coast Guard Administrator said that the drilling and construction of the relief wells is still ahead of schedule. Of course there can always be delays. Like on Saturday, a set of tongs which are used to hold the casings in place broke.
BP is still maintaining their drilling of the relief well should be completed sometime in August, of course there are no guarantees. Currently, they are close to 11,000 feet below the sea floor.
In other words, it's questionable whether BP had the legal right to enter into the agreement without the two partners giving their consent.
So not only are there concerns raised over the misuse of the fund for purposes not associated with damage from the oil spill, but now it could cause major problems going forward concerning the part of the other partners in the oil well as far as paying damages goes.
Anadarko was 25 percent partner in the well and Mitsui was a 10 percent partner. BP was the majority partner, accounting for the other 65 percent ownership in the project.
A lawsuit was obviously coming concerning sharing in the liability for the accident anyway, as the recent attack by Anardarko CEO Jim Hackett was an obvious prelude to BP being forced to go to court to get them to keep the company from "shirking its responsibilities," as BP stated.
Hackett said, "The mounting evidence clearly demonstrates that this tragedy was preventable and the direct result of BP's reckless decisions and actions. BP's behavior and action is likely represent gross negligence or wilful misconduct."
This is alluding to the language used in the law on capping the amount of liability at $75 million for oil companies. The reality that BP said they would ignore the cap could be interpreted as an admission of guilt concerning the "gross negligence or wilful misconduct" accusation from Anadarko.
On BP's part, this was a big mistake, as Anadarko spokesman John Christiansen said, "Although we have not been involved in any way with the White House or BP in the process, we are pleased that BP has agreed to establish a $20bn escrow fund.
"We believe this action by BP is consistent with their continued message that they will pay all legitimate claims."
... And it could be interpreted that way going forward.
All of this and there has been no determination on what caused the accident, and that doesn't include Cameron International (NYSE:CAM), which made the blowout preventer, or Halliburton (NYSE:HAL), who did the cement work; either of which could have involved faulty work which resulted in the oil spill.
So we have all this liability being paid, with no one but BP involved in the decision-making process, and no knowledge of what caused the accident in the first place to see if there was negligence from other parties.
After the grandstanding by the politicians and twisting of BP's arm to get the escrow account, we see it as another mistake made by lawmakers trying to gain political capital without considering the overall picture.
From the point of view of sharing liability, this is a disaster, and it's not certain it will stand up in a court of law when partners are left out of negotiations.
It could also make BP more vulnerable than it maybe had to be, and why they should have not allowed themselves to be pressured into the escrow account, as possession is everything, and now that they have to turn their money over to the possession of the government, there isn't much chance they'll ever have a say in it.
BP should have taken their time with this no matter what the pressure was, as in hindsight they now see they've painted themselves into a corner, and calls by lawmakers who pressed them on it to now have their partners start to help them pay for liability claims, sounds hollow, as these same politicians created the circumstances which has led to yet another fiasco.
The legal questions continue to grow concerning the escrow fund, as it's not even confirmed that in and of itself it's legal. Add to that the potential abuses, and now the realization the other partners in the oil well weren't even communicated with by lawmakers or BP in the creation of the escrow fund, and the legal questions continue to mount as the process plays itself out.
Obama and the Democrats especially, are guilty of their own demagoguery in the matter, which created an atmosphere of a need to rush along the paying out of liability claims, as if them taking it over will in any way expedite the payouts. In the end, as always with government bureaucracy, it'll take longer.
In their own rush to build political capital, the administration has again proven they have a difficult time focusing on more than one thing at a time, and in the end, have made the circumstances much harder than it had to be.
Saturday, June 19, 2010
Due to the many violations that were found to have contributed to the Texas City explosion, BP was fined $21 million. It also was mandatory that they were required to shutdown their Alaska oil drill site to make repairs to the corroded pipe. There seems to be a pattern with BP, for these two incidents to happen within a year of each other and now here we are again with BP causing the worst oil spill in U.S. history.
BP's chief executive prior to Tony Hayward was John Browne, Hayward's mentor. Browne was with BP for close to 10 years before resigning in 2007. "We have to get the priorities right and job number one is to get to these things that have happened, get them fixed and get them sorted out. We don't just sort them out on the surface we get them fixed deeply, said Browne in an interview four years ago after the Texas City and Alaskan catastrophe's.
The thing is BP had four years to fix their problems and if they had, we would not be watching the horror unfold of the worst oil spill in U.S. history.
Brown built BP by taking over other oil companies. Everyone in the oil business new he would then fire the best engineers and ruthlessly cutting costs.
Oil Companies Must Rewrite Spill Response Plans: Exxon (NYSE:XOM), Shell (LSE:RDSA), ConocoPhillips (NYSE:COP), Chevron (NYSE:CVX)
Markey said," there has to be a complete inspection of every facility in the Gulf, not just BP. The only thing worse than one oil rig in the bottom of the Gulf of Mexico, would be two oil rigs in the bottom of the Gulf of Mexico. We have to make sure there are no ticking time bombs." He also said the plans were "90 percent identical" for all five companies.
This is the exact reason Obama declared a six month moratorium and any deepwater drilling. To give the government time to investigate and complete their investigation as to the causes of the Gulf of Mexico oil spill. This ban has effected 33 drilling rigs in the Gulf. There are 17 members of the House from Gulf Coast states who are urging Obama to lift the ban as it will effect over 20,000 jobs in the area.
According to a lawmakers statement, "many offshore drilling companies will not be able to survive the ban."
While their "partners" have helped point the finger at BP, with some increasingly becoming vocal in that regard, there is a slow recalling of the fact that BP wasn't in this alone, and BP is pushing for these companies to pay for their share in the claims related to the accident, which could result in an all-out war between the companies if the rhetoric level is raised too high publicly, as there are billions at stake, and BP is hoping to pass a portion of that onto the other oil companies.
Anadarko is becoming much louder and involved, as they're probably the most potentially liable of BP's partners, as they held a 25 percent stake in the project.
One thing all the other oil companies have protecting them is the information coming out which seems to implicate BP as being lax in their oversight of the project, which could help those companies in the long run.
The problem is though, what cause the accident hasn't been determined yet, and if it was a combination of factors, each of these partners with BP could end up being liable for a lot of the accident if they played a part in it, for example, the blowout preventer built by Cameron International, or the cementing job performed by Halliburton.
On Anadarko's part, they made what seems to be a preemptive strike against how much they may be liable, as James Hackett, chief executive of Anadarko Petroleum, said on Friday that "The mounting evidence clearly demonstrates that this tragedy was preventable and the direct result of BP's reckless decisions and actions."
If all of this ends up going to the courts, it'll be interesting to see whether or not BP would be forced to continue making payments if there is the possibility the other oil companies could be held liable as well.
Friday, June 18, 2010
The companies should be "contributing to any fund that is constructed for any part of the reconstruction. They cannot escape responsibility," said Markey. He also said he would fire BP's Chief Executive Officer Tony Hayward. Before a House panel yesterday, there was seven hours of testimony heard, Hayward was reamed by lawmakers. Anadarko owns a 25 percent stake, Mitsui owns a 10 percent stake in the Gulf project.
BP partners are considered investors "for better or for worse," said Markey. So they should be prepared as a partner to bear their part of the stake. Jim Hackett, Anadarko's Chief Executive Officer said today that his company will be looking to BP to pay all claims as a result of the oil spill. Hackett continued, there are documents showing that BP failed to heed "several critical warning signs" during drilling and "caused the accident by "reckless decisions and actions."
A Mitsui Oil Exploration subsidiary said,"with regard to the issue of the escrow account, drawing an immediate conclusion about the underlying matters at hand would be premature."
U.S. citizen and BP managing director Robert Dudley will now head up the cleanup effort on behalf of BP, but will still report directly to Hayward.
Svanberg didn't say too much about the reasoning behind his decision, other than the fact "It is clear Tony has made remarks that have upset people."
Some of this is cultural differences, Hayward being what appears to be an introvert, and the anger of some Americans over what has been described by Obama and Democrats as British Petroleum, possibly on purpose, in order to take attention away from some of the American companies involvement in the matter. At least that's the perception of a number of British people.
Shell is pointing out that they would have been drilling in much shallower water than the depth that Deepwater Horizon was drilling. They would only be drilling 150 feet verses the 5,000 feet BP is drilling at. The officials at Shell feel this move is totally political because of the disaster in the Gulf. Obama employed the Geological Survey which is supposed to determine the companies ability to respond, as well as determining the potential impact if they were to were to face the challenges of an oil spill like is currently being experienced.
Leaders of the Center For Biological Diversity are saying that they do not have the technology in the Artic if there were a massive oil spill. Which would be catastrophic for the entire ice environment, among several species including the polar bear.
The Mineral Management Services (MMS) say that there is approximately $27 billion barrels of oil in just the U.S. portion of the Artic. Obama feels the domestic exploration of oil would make the country less dependant on foreign oil as we pursue the transition to a cleaner oil.
Mitt Romney is the latest to address the mishandling of the crisis by Obama and his administration.
Romney said about Obama's failure, "In this kind of a crisis situation, the president's response should have been to step in, bring in the experts, people from various oil companies, from leading institutions, academic and engineering firms and look at the options for actually capping this oil spill and then actually making those decisions."
Others who have actual management experience have stated similar things. Obama's enlisting of clueless college professors and government scientists has been blasted by many of those viewing the situation as well, saying Obama should have gone out and recruited experienced people who have dealt with similar circumstances.
Obama wouldn't even accept the help of nations with oil skimmers which could have extracted oil from the Gulf almost immediately, because of his catering to unions who would have thrown a fit because he allowed foreign boats in the area which hadn't been built in the country. President Bush trumped the draconian law which was implemented in 1920, and allowed ships in to help with Katrina, which the majority say he did a better job of managing.
Standard and Poors 500 also lowered their rating of BP on Thursday. This is the second downgrade they have given BP in a month from an A to A-1. On Tuesday, Fitch also dropped their rating six notches of BP's long term debt to just above junk level.
David Staples, managing director of Moody's Corporate finance group said," the oil leak has to stop. As long as the oil leak continues, the costs continue to mount and the exposure to litigation continues. BP declined to comment on the downgrade. Staples did say that BP would remain on close review for further future downgrades.
Bryon Grote, BP's Chief Financial officer did say on Wednesday that he hoped the deal struck with the White House would help reinforce their prior rating of AA from Moody's.
Thursday, June 17, 2010
Dan Johnson, a Chevron spokesman said, "on Saturday we immediately began to soak up oil. That's why we have collected 500 barrels so far. There's still 300 more out there and we will work diligently to clean it up." The formal cleanup plan will be part of Chevron's official response to a notice of violation. This is not expected to be done for around another 10 days.
The NOV is the official process for environmental disasters, making Chevron legally liable as well. The EPA has given credit to Chevron for their aggressive cleanup and taking full responsibility. The EPA stated, "we expect and will work to ensure they remain responsive. EPA has been and will continue to review and provide direction on incident objectives and progress made under those objectives. We will ensure that actions taken are sufficient to clean up the spill."
The analysts wrote, "U.S. Land drilling is trending up 12% 2Q to date relative to 1Q. This, coupled with favorable service intensity (horizontal drilling is trending up 16%) and improving pricing paves the way for a considerably better than expected 2Q. We note that the group has began to out preform the market with the OSX up 12% since June 1 vs. the S&P up 4%. Attractive oil prices, improving international spending levels, and compelling valuation are all reasons to be optimistic that the oil upcycle remains underway."
"Halliburton represents on of the most attractive stories in the industry right now, with an industry leading position in North America and growing market share domestically and internationally."
Halliburton serves several natural gas and oil companies worldwide in about 70 countries. These services include the production, exploration, and development of the oil and natural gas. The 2010-2012 earnings per share estimates by Susquehanna were raised from $1.39, $2.08, $2.71 to $1.46, $2.10, and $2.74.
This might seem positive but it is not. For these animals to leave their natural habitats and be showing up in extremely shallow waters is an indication that they are fleeing from the oil that has most likely destroyed their homes. Not to mention the fact that with such a dense amount of animals in such small areas, oxygen will run out causing mass die-offs. They are also easy targets for prey.
Larry Crowder, a Duke University marine biologist said, "A parallel would be: Why are the wildlife running to the edge of a forest fire ? There will be a lot of fish, sharks, and turtles trying to get out of this water they detect is unsuitable."
Scientist are daily going out to inspect and collect the hurt and dead animals. They say the numbers are relatively small considering the massive amount of oil that has been deposited into the ocean. Although they fear most fatalities will never fully be accounted for because most animals that can't make it to the shallow waters will die and end up on the bottom of the ocean. The most recent figures of fatalities are: birds 783, turtles 353, and 41 mammals.
One of the latest concerns is from Mississippi Gov. Haley Barbour, who said he's not sure it's a good idea because BP would be a more predictable company in using their capital to generate revenue, which in turn would make them a healthy company which would be able to pay for their responsibilities, rather than a company dumping billions into an account that produces nothing.
BP has already been paying out millions in claims, and it is questionable as to whether or not this fund will be more fair and faster than they are doing it now.
While acknowledging BP must pay all for the losses in the region, Barbour said it remains to be seen whether or not the escrow account was the most efficient way to accomplish it over the long term.
Wednesday, June 16, 2010
After a four hour meeting with BP officials, Obama made the announcement of the agreement. BP has also said they will set up an additional $100 million fund which sole purpose would be to be used to compensate oil rig workers that will lose six months pay due being laid off because of Obama's moratorium on deepwater drilling.
"The structure we are establishing today is an important step toward making the people of the Gulf coast whole again, but it will not turn things around overnight. This is about accountability. At the end of the day that's what every American wants and expects. The people of the Gulf have my commitment that BP will meet its obligations to them. This $20 billion amount will provide substantial assurance that the claims people and businesses have will be honored," said Obama. He ensured that the $20 million is not a cap on BP's liabilities and will pay more if needed
The claim process fund will be run by Kenneth Feinberg, who was in charge on the September 11th compensation claims process and overseeing payments to families of victims. There will be a three member panel who will be in charge of the claims that are turned down. This setup helps setup a formal process instead of vague promises by BP.
The dividend due on June 21 would have had the company pay out $2.6 billion.
There has been a lot of pressure from Obama to have BP withhold a dividend until more data is available as to the costs of the Gulf oil spill.
BP also agreed to place $20 billion into a fund for those affected by the oil spill to be paid out over a period of time.
Tuesday, June 15, 2010
These talks have been going on for two days and are being monitored by the government. Talks conclude at midnight on June 16th, which could begin the strike according to unions and employers. The three unions involved are Industry Energy Safe, the Norwegian Oil Industry Association, and the Norwegian Organization of Managers and Executives. The breakdown of these three unions happened May 6th.
The Shell operated Draugen Platform puts out about 43,000 barrels of oil daily. This is the platform that the unions are calling a strike on. Eli Ane Nedreskaar, a group spokeswoman said, "should negotiations break down, the OLF may choose to announce a lock out, which would enter into force four days later. But this has not been decided yet."
In 2010 Norway's oil production as well as natural gas condensate and liquids is estimated at 1.87 million barrels a day. That puts them as the sixth largest supplier of crude oil as well as the second largest importer of gas. The Industry Energy Union is demanding wages for cleaners be the same as those who work offshore.
On the matter of the disputed damage payment, Gibbs said. " We have to get an independent claims process. I think everyone agrees we have to get BP out of the claims processes, and as I said, make sure that fisherman, hotel owners have a fast and efficient and transparent claims process so that their getting their livelihoods replaced."
"This disaster has taken their way of making a living away from them," he said. "We need to do this quickly, and we have to make sure whatever money goes into that, that in no way caps what BP is responsible for. Whatever money they owe to anybody in the Gulf, there going to have to pay regardless of the amount."
According to Gibbs, the purpose of taking the control of the claims process out of BP's hands would be to make economically distressed individuals and businesses "whole." Obama has made an outline of a comprehensive response and recovery program.
Whether or not the estimates of U.S. governments scientists is accurate or not, the numbers of between 20,000 to 40,000 barrels a day spilling into the Gulf has increased the potential payout by BP to a much higher amount than originally thought.
Fitch looks at the loss of financial flexibility being a big issue for the company, based largely on the assumption BP will cave in and put billions into an escrow account which would then be used to pay out claims; at least hopefully that's what it'll be used for.
Once the government get access to $20 billion, if that's the amount and BP agrees to do it, they can start paying out all sorts of spurious claims which at best, may have a tenuous connection to the oil spill.
An immediate fallout will also be the increased cause of debt for the company, making it more costly to do business.
Monday, June 14, 2010
Anadarko, who owns a 25 percent stake of the Macondo discovery, the site of the explosion and oil leak that followed, has lost 33 percent or 25 billion of market capitalization since April 20th. BP who is working in the field unlike Anadarko, has lost $69 billion or 37 percent. If Anadarko is required to foot their 25 percent of the bill, that would equal to $98 billion. While BP's share at 67 percent of the discovery puts their required cost at $106 billion.
Obviously, this is no where near what oil stock prices are reflecting, which is much less. BofA Merrill Lynch Global Research estimates the net value of present claims could run close to 11 billion total. What's completely uncertain is what the potential punitive damages will end up costing these oil companies. By looking at BP's share prices, it's expected to be extremely high.
The question is, will Anadarko also be held responsible and required to pay anything past the initial oil cleanup costs. Anadarko has stated their interest in Macondo did not come until well after drilling began. They're also maintaining they had no involvement in the operating procedures or in designing the well.
The American Association of Professional Landmen's Form 810 clearly states, all parties to the agreement usually bear liability for damages based on their stake except "when liability results from the gross negligence or willful misconduct" of one of the involved parties. So if BP ends up being found grossly negligent, it would open the door for Anadarko being able to contest paying any punitive damages.
BP's stock prices dropped another 9.3 percent, bringing it to 355.5 pence. All the while, President Obama has been putting pressure on BP to drop dividend payments to ensure that there are funds set aside for future oil cleanup and oil containment efforts. Also to make sure there is enough to pay for compensation to U.S. citizens.
Jonathan Jackson, head of equities at London based Killik & Co. said, "the call from the U.S. Administration for a third party administered fund to meet the claims of victims of the spill appears to be an attempt to show the U.S. public that the government is doing something. As a political compromise, we would expect BP to take this request."
Exxon Mobil as well as Chevron both saw a significant rise. Exxon, the largest U.S. energy company, saw a 0.5 percent rise to $62.17 pushing crude oil to over $75 a barrel in New York. Chevron, the second largest U.S. energy company rose 0.4 percent to $74.33. The S&P 500 rose 0.8 percent to 1,099.82. The Dow Jones Industrial Average also saw an incline of 0.7 percent, or 74.37 points bringing it to 10,285.44. While the Nasdaq rose 18.44 points or 0.8 percent to 2,262.04.
David Katz, chief investment officer at Matrix Asset Advisors Incorporated in New York, stated, "the recent sell off was based on fear, but the U.S. economy is very much intact and it seems like the European economies are muddling through. On days when there are no concerns or fear mongering, the market should get a bounce like we saw last week and it continues today."
The New York Stock Exchange Arca Oil Index was gaining 1.1 percent and the Philadelphia Oil Service Sector Index adding 1 percent.
This is one of those things that hopefully won't happen. In the current Obama administration, they don't want to let the opportunity of any crisis passing without taking advantage of it, and that looks like what the Democrats are again attempting to do.
why this is so is it's going to be a general account, and the Democrats don't like the idea that BP will pay out only "legitimate" claims.
You can already see these redistributionists greedily eyeing the assets of BP and using them for any number of clownish and unrelated things outside of the oil spill.
Once the Democrats got this general fund set up, they could take it and spend it just about any dubious way they wanted with the most tenuous reason being asserted.
Why Obama and the Democrats want a special account created so badly should only send up red flags everywhere. They just want another $20 billion they can throw around to their special interests, while spending just enough on the cleanup to satisfy those watching them.
BP has been settling a lot of claims, and they continue to do so while already spending billions to battle the effects of the oil spill, like the millions they've been giving to Louisiana to build the berms or islands to battle the oil from coming to shore.
This is nothing more than a big government power play to extract more money from BP and to allow them to spend the money how they want, as if the Democrats can be trusted to spend money in general, as we've seen over the 18 months since they've been in power and are financially destroying the country.
Sunday, June 13, 2010
The site of the leak is estimated to be losing about 5 gallons a minute, for a total so far of 400 to 500 barrels. As of yet, the leak has not been capped off. The Salt Lake Valley Health Department says the oil has leaked into the Jordon river in two different areas and has now made its way into the Great Salt Lake. Officials say drinking water has not been effected and is not expected to effect the surrounding areas.
Residents are being asked to stay away from Liberty Park as well as Red Butte Canyon. This is so crews working can do so without interruption. Also, the water with crude oil mixed in is considered toxic and is not safe for humans or animals. There are several water access points.
The Mayor, Ralph Becker said, "we are working tirelessly with Chevron teams to contain the spill from the critical ecological areas effected in our city. Our fire teams have capped the site and will work to determine the damage and best course of action. We ask all residents of Salt Lake City to help by staying away from these areas."
There is also growing tension between the government and BP, according to a top executive at BP. All the while trying to keep up the morale of those working so hard to get control and contain the oil spill. Doug Suttles, BP's chief operating officer, thanked BP workers, government officials, as well as contractors at the command center. Suttles said, there are "big frustrations out there." It's a huge challenge, we're doing something that we hoped we'd never have to do, but we're doing something that no ones ever done before," he said. "And I want to say thank you, you guys are doing a tremendous job under horribly difficult circumstances."
Meanwhile, the oil slick continues it path along the shorelines. With hitting Louisiana, Texas, Alabama, and Florida causing beaches to be closed and fragile environmental habitats to be destroyed, it's now pushing its course on to the East Coast.
The Attorney General in Florida and the State Treasurer in Louisiana have requested BP to put $7.5 million in escrow accounts to be used for their residents as well as to compensate the states for damages now and in the future. As of March 31st, BP only had $6.8 million available in cash and cash equivalents.
Friday, June 11, 2010
Transocean is the company that owns the drilling rig. The company has invoked an American 19th century law that will limit their financial liability to only $26.76 million. This amount totals only a small amount of what would actually be requested. Just three weeks after the massive explosion, Transocean petitioned a U.S. federal court for protection under the Limitation of Liability Act of 1851.
Martin Davis, director and professor of law at the Tulane University Maritime Law Center said, "it may work, they've got a chance." The Deepwater Horizon rig is technically considered a mobile offshore drilling unit, meaning it is classified as a seagoing vessel the same as a passenger ship or freighter, according to maritime law.
Exxon has seen a decline of 0.6 percent bringing it to $61.32. The Dow Jones Industrial Average is also down 31 points or 0.3 percent lower to 10,141. This downward trend is seen on the S&P 500 as well, losing 0.3 percent to 1,079. Seeing an increase is the Nasdaq Composite Index of 0.2 percent.
Crude oil futures fell below $74.00 a barrel causing a decline in energy stocks, as well as the Exxon decline Chevron also dropped 1 percent.
"People are seeing that the economy isn't booming, but it's also not getting worse," said Malcom Polly, chief investment officer at Stewart Capital Advisors. "That's why the confidence numbers are getting a little better. But actual spending still isn't strong enough where we can say that we'll get a traditional consumer led recovery."
Of course these numbers can't in any way be trusted, as government scientists are no different than saying a pimps' prostitute. They both are for sale and do what is told them.
Even the numbers thrown out by the scientists are suspect, as first they hit out at BP for understating the amount of oil leaking into the Gulf at the early stages of the accident, then they now say the spill is from 20,000 to 40,000 barrels a day.
Which is it government scientists? Is it 20,000 or 40,000? The numbers are so far apart as not to be considered credible in any way.
What these so-called scientists are saying in doing is attempting to paint BP in a bad light, but at the same time cover their own worthless rear-ends by using these types of numbers.
Even the 20,000 a day is in line with the original estimates by the government, which were from 12,000 to 19,000 barrels a day. So how does that remain the same on the lower end, while expanding to outrageous numbers on the higher end. Seems like they aren't scientists, but government mouthpieces doing the bidding of their masters.
If those numbers were even close to being accurate, BP would probably be finished as a company, and more than likely the reason they're even seriously being thrown out there is in order to extort more money from BP, or portray them in the light of needing to be taken over, which is what some Democrats have been drooling over to do.
It could also be an attempt to arrest the growing discontent of the British people over how BP has been treated by Obama and his administration, which have brought statesmanship to a new low by their street talk and methodology, rather than respectful dialogue.
Democrats and Obama know they're being watched closely on the financial side of things here, as they've already devastated the country and its financial future in 18 months.
Now they would want nothing better to get control of BP and extract billions out of them in order to keep a distance from spending more in an attempt to take care of the circumstances surrounding the oil spill in the Gulf.
I'm primarily referring to the ridiculous notion that BP should pay for the decision Obama made to impose a 6-month moratorium on oil drilling, which will devastate the region which is so reliant on oil to move their economies.
Obama and the Democrats are unbelievable trying to make BP pay for the unemployment benefits of those Obama has put out of work.
Why this is such an outrage is the oil rigs affected by the moratorium have already been inspected and cleared, and there's simply no reason to keep them from resuming operations.
The whole idea of the moratorium was to take a breather and be sure there weren't other possibilities of an accident happening. Now that that has happened with 29 of the 33 oil rigs still in the Gulf, there is no reason to resume operations and get people working again.
Lacey started his tell all novel in 2002 while still employed at BP as a financial analyst and accountant for almost eight years. His novel is titled "Involuntary Separation: Corporate Downsizing Gone Fatally Wrong." He isn't surprised at all at the massive oil spill and details the numerous missteps and shortcuts that BP took.
After helping BP lay off thousands of employees, he quit in 1988. One of BP's strategies was to contract to other smaller companies to decrease their liability in case of oil rig explosions and other potential accidents. "Prior to downsizing, BP drilled for its own oil," said Lacey. "So they would've been running the entire operation themselves and they would be responsible for the safety and liability for the spill."
That way BP could shift the blame to these other companies, even if they were to small to be able to pay for the oil cleanup and would have to file bankruptcy, he said. "If it was a smaller spill, they'd let the drillers go bankrupt." He said the only reason they're paying for this spill is because of the huge amount of public outrage BP would get if they did not.
We saw the scenario at the congressional hearings where each company was pointing their finger at the other, even President Obama was outraged at the companies lack of responsibilities.
Lawyers looking everywhere for BP blood to sue, got creative and are including everyone around the world who holds shares in BP.
About 61 percent of all shareholders of BP reside outside the United States, the reason for going this route by New York's Zwerling, Schachter & Zwerling.
According to the complaint filed, "Defendants were aware that BP's operations in the Gulf were inadequate and unsafe with respect to the risks associated with those operations, particularly with respect to an oil spill and its consequences."
Among the defendants named are BP CEO Tony Hayward, Chairman of the board Carl-Henrie Svanberg, and CFO Byron Grote.
Thursday, June 10, 2010
Crude Oil Futures Trading: Anadarko (NYSE:APC), Transocean (NYSE:RIG), Halliburton (NYSE:HAL), Cameron (NYSE:CAM), BP (NYSE:BP)
Transocean (NYSE:RIG), Halliburton (NYSE:HAL), and Cameron (NYSE:CAM). This extreme drop, which was BP's lowest since at least 1972, was said to be caused by the fear of the impending financial doom of the full scale of BP's fuel spill and the possibility of BP filing bankruptcy.
Today, investors were buying as quickly as they were selling yesterday. This gave BP a boost as well as oil stock prices across the board. Raymond James analyst Alex Morris said, "there was a lot of fear in the market yesterday, people maybe have slept on it and are getting a little less scared of the stock. People might just be thinking that yesterdays sell off was overblown and premature."
BP climbed almost 8 percent to $31.50, reaching the high of the day at $33.04.
Anadarko Petroleum rose 8.6 percent to $37.84, this was also after a huge loss on Wednesday of 19 percent. Anadarko is a minority share holder in the Macondo well.
Transocean was up to 4.5 percent to $44.52, there loss yesterday was 8.1 percent.
Halliburton dropped only 2 percent on Wednesday, but today saw a 5 percent rise to $23.72. Cameron was up 4.4 percent to $35.62.
Even so, Fletcher increased his risk rating on BP from medium to high, looking at the high end of the estimates of $40 billion as what they could ultimately pay out for all liabilities.
"We recognize that there is little certainty or definition around the costs of the spill to BP's shareholders," said Fletcher. "The quantum of cost and the share of burden remains uncertain but we have adjusted for almost four times what we believe reasonable cost to be."
In the long-term, Fletcher is viewing the situation of the stock, as mentioned, being discounted on the basis of the worst case scenario, rather than the likely outcome, making the company undervalued in his opinion.
Florida has closed over 6 miles of their white sand beaches. What used to be a beautiful beach front filled with bustling tourist staying at Florida's beach resorts this time of year, are now desolate and the white sands are stained with the evidence of the ongoing environmental disaster. Not to mention the massive layoffs that are sweeping the area.
When just days ago BP officials were publicly declaring that Florida would escape the impact of oil upon their shorelines. On Wednesday they were still insisting there are no oil plumes yet the testing done by government showed there are large plumes of crude oil as far as 3,000 feet down. BP seems to be taking a stance of "lets pretend, make believe, or liar liar." Or perhaps they're simply trying to fool the public.
Ken Salazar, The Interior Secretary told U.S. Congress he now expects BP on top of everything else, to pay for canceled salaries of anyone unexpectedly without work because of the six month memorandum on deep ocean drilling.
"They have about a month before they declare chapter 11 bankruptcy," said Simmons. "One really smart thing Obama did was about three weeks ago he forced BP CEO Tony Hayward to put in writing that BP would pay for every dollar of the cleanup, he continued, "but there isn't enough money in the world to clean up the Gulf of Mexico. Once BP realizes the extent of this, my guess is they'll go into panic and file chapter 11."
In less than seven weeks BP has lost over half its market value, this is BP's lowest level since 1996. Their bonds are also being crushed. Before April 22nd, the day the Deepwater Horizon sunk, BP shares were being traded above $60. With yesterdays close, there was a loss of 16 percent at $29.20.
Wednesday, June 9, 2010
BP said Tuesday that a ship on the surface is collecting the oil that is being captured. On Monday, 620,000 gallons of oil was contained. On Tuesday, between midnight and noon there was already 330,000 gallons collected. So based on the governments estimate of 600,000 to 1.2 million gallons being lost daily, that would be over half the crude being captured and contained.
Whatever the actual amount of oil being deposited into the ocean is, the bottom line is it still has to end up somewhere. BP is planning on bringing in a storage vessel and floating production, which officials are saying may be the answer. "It's being brought in because it can handle far more oil than this well is producing," said BP spokesman Robert Wine. Although he does not know when its planned arrival is or where it is going to be coming from.