Wednesday, June 30, 2010

BP (NYSE:BP) Now Hit with Mental Health Claim

The ridiculous notion that BP (NYSE:BP) needs to start paying the Louisiana's Department of Health and Hospitals $10 million in order to have people "treated" for the stress related to the Gulf spill seems to be just a grab for some money for the government there.

According to department head Alan Levine, the reason this should be done is "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."

The unprovable assertion that people in the area will become addicted if BP doesn't pay the $10 million is outrageous, and needs to be rejected by BP.

Here's another case where BP could get hit with an endless number of claims. All someone has to do is say they're angry and stressed about the Gulf spill and they get free treatment, or by extension, a ton of money for being "victims."

As measured by "anger, anxiety and uncertainty," that could describe the entirety of a persons' life. To imply this is a special circumstance as it relates to so-called mental health is a stretch by any way of looking at it.

TNK-BP Could Buy BP (NYSE:BP) Assets

One strategy BP (NYSE:BP) is sure to have to employ before the oil spill fiasco is over will be to sell off some of its assets in order to generate more liquidity for the company.

To that end, Russian joint-venture partner TNK-BP said it would take into consideration buying some of the assets held by BP when they are put on sale.

Maxim Barsky, who is deputy chief executive of the joint venture, said he and BP CEO Tony Hayward discussed this when he recently met in Moscow to talk with TNK-BP's chairman Mikhail Fridman.

Hayward did say on the same trip, to Russia's leading energy official, Igor Sechin, that BP had no plans to sell any of its assets in the country.

Monsanto's (NYSE:MON) Earnings Plunge 45 Percent in Third Quarter

As expected, Monsanto (NYSE:MON) struggled in the third quarter, as profits plummeted by 45 percent for the period ending May 31.

Earnings dropped to $384 million, or 70 cents a share, from $694 million, or $1.25 a share, from the same quarter last year.

After adjustments, the company earned 81 cents a share, while analysts had been looking for 79 cents a share.

Revenue for the quarter dropped from $3.16 billion last year to $2.96 billion in 2010. That was a significant miss, as analysts had looked for an increase over the third quarter last year, expecting $3.17 billion in revenue.

The primary reason for the poor performance of the company was the ongoing struggles related to their Roundup herbicide business, which has seen revenue, profits and margins under pressure as it has had to compete with generic competitors with lower prices.

Weed resistance to the herbicide has been another issue related to declining sales.

Also a disappointment to the company has been its new Roundup Ready 2 Yield soybeans, which haven't done as well as the company hoped in relationship to performance, which has generated complaints from farmers on the high price of the product.

Monsanto has been addressing those issues by lowering prices for seed licensees and cutting premiums paid on the seed by farmers by up to half of what it had been.

The company reiterated its guidance for the fiscal year for earnings, saying they're maintaining the $2.40 to $2.60 a share they've asserted in the past.

Guidance for next year was also confirmed, where Monsanto still looks for earnings growth to be somewhere in the mid-teens. The majority of that growth will come from the seeds and genomics segment of the company.

BP (NYSE:BP) Fund to Pay Six Months Out to Begin With

Kenneth Feinberg, who is administering the $20 billion escrow fund of BP (NYSE:BP), said he has a goal of paying out six months worth of reimbursement to those impacted by the oil spill in the Gulf of Mexico.

This is in response to representatives from the area saying the month-to-month payments aren't doing the job of helping companies remain in business.

Feinberg reiterated that today in talking to the House Small Business Committee today.

One good move suggested by Feinberg was to request the Justice Department to oversee the program in order to make sure the money is being given to those who are actually victims, and in order to keep false claims from clogging up the system, which he's trying to streamline.

Feinberg hopes to have the facility operational within 30 days in order begin the negotiation process for final payments to those affected by the oil spill.

BP (NYSE:BP) Fined $5.2 Million for False Production Figures

The U.S. government is going over BP (NYSE:BP) in a stringent manner, and they fined the oil giant $5.2 million in relationship to production figures on a Colorado Indian reservation.

BP America is the unit under scrutiny, who the Interior Department says has misreported production data repeatedly on tribal lands of the Ute since 2007.

After Southern Ute auditors had found the alleged discrepancies, BP had promised to change them to the correct figures, which after a period of time, they were checked again, and found to have continued to report false numbers.

While all of this is fine, it is a little cowardly in my opinion to have the Interior Department wait until these circumstances to deal with it and pile on the company, rather than have taken care of it when it happened.

The question is why did they let it go on so long if they indeed knew about it. This doesn't exonerate BP of course, just saying it seems it should have been taken care of long ago if it was true, not at an opportunistic time to make the Interior Department look good.

Caterpillar Seeking $7 Million in Incentives from North Carolina

Now that Caterpillar (NYSE:CAT) has narrowed its search for its new component manufacturing facility to three areas: Winston-Salem, North Carolina; Montgomery, Alabama; and Spartanburg, South Carolina, they are taking the next step in seeking local incentives to see who will give them the best deal.

It has to be assumed the three locations are considered pretty much equal, so Caterpillar will obviously use that as a bidding incentive for those localities to see which one will get their business.

North Carolina has already received initial requests from Caterpillar for $7 million in local tax incentives.

“They’re asking for pretty big incentives,” Forsyth County Commissioner chairperson Dave Plyler. “$3.5 million from us, the county, and $3.5 million from the city. What they do with it is up to them.”

The new plant will hire approximately 500 workers.

BP (NYSE:BP) Cleanup On Hold as Worst Waves of Hurricane Alex are Over

BP (NYSE:BP) said the worst of the waves, which were in some cases as high as 12 feet, have passed where the Gulf oil well is leaking, although they were on average smaller than that.

Even so, the waves were still in the seven foot to eight foot high range, which keeps the cleanup efforts on hold until they subside; at least in relationship to booming and skimming operations.

Other oil companies, including Exxon Mobil (NYSE:XOM) and ConocoPhillips (NYSE:COP) has also evacuated workers from the Gulf region. Approximately 25 percent of all oil production in the Gulf has been stopped, along with about 9 percent of natural gas production.

While Tropical Storm Alex should completely bypass the leaking oil well of BP, weather models show there's an over 40 percent chance that one will enter the area where the oil well is leaking by the end of August.

Deutsche Bank (NYSE:DB) Upgrades BHP Billiton (NYSE:BHP)

The market largely ignored the upgrade of BHP Billiton (NYSE:BHP) by Deutsche Bank (NYSE:DB), punishing the stock in New York as continued concerns over demand for raw materials in a shaky global economy continue.

Add to that the unsurety of the super tax in Australia and there's a need to settle things down to get a better picture of where they are going, especially with external forces like the Australian government acting upon them.

For the upgrade, it was from a "Hold" to a "Buy." On June 16, JPMorgan went the opposite direction with BHP, downgrading them from "Neutral" to "Undeweight."

While it seems the Australian miners definitely have an upper hand, and half the country surprised the politicians by supporting the miners with the 40 percent super tax.

It wasn't to solely support the mining companies, but the understanding it could devastate their economy and the good jobs the industry provides for them.

As with all governments around the world, Australia needs to realize they need to cut back on their programs and promises, as it's simply not sustainable, as Europe, the United States, and now Australia, are proving.

Caterpillar (NYSE:CAT) Increasing Excavator Capacity Fivefold in China

Caterpillar (NYSE:CAT) recently announced it'll be acquiring the 15.9 percent stake of Xuzhou Construction Machinery Group in their joint venture Caterpillar Xuzhou Ltd., and after a period of expansion, will increase excavator manufacturing capacity by five-fold by 2014.

The two companies, which had been in the joint venture since 1995, didn't reveal any of the terms of the deal.

“In the next few years, we expect China to continue to invest heavily across the country in a wide range of infrastructure improvements,” Rich Lavin, Caterpillar group president with responsibility for emerging markets, said. “It is critical for Caterpillar and its dealer network to continue investing in China.”

The new plant, which had a groundbreaking ceremony on Tuesday, will manufacture larger excavators than they have been there.

Government Taking Over BP (NYSE:BP), Transocean (NYSE:RIG), Anadarko (NYSE:APC) and Halliburton (NYSE:HAL)?

In somewhat of a shocking revelation, the government, on June 23, sent letters to BP (NYSE:BP), Transocean (NYSE:RIG), Anadarko (NYSE:APC), Halliburton (NYSE:HAL) and Moex (Mitsui & Co.), saying they must provide information of any kind in relationship to depleting their assets to the U.S. government.

The government evidently doesn't want any deals done which could result in the companies not having the assets available to pay for any judgments which may be made against them.

Bloomberg News made a Freedom of Information Act request concerning the letters, where they said the U.S. government said they want to be sure they don't “deplete those assets that would be available to satisfy a judgment," in case of liability being found against them.

Some of events the government wants to be made aware of are acquisitions, disbursements, sales and restructuring.

While this may not be an official takeover like the banking industry, practically this is a takeover by the government of these major oil companies, as they're essentially forbidding them from making any type of major transaction and must evidently get permission from the U.S. government if they are thinking of doing it.

So the oil giants are going about their daily operations, but they are locked in time as far as making deals without the approval of the U.S. government.

This of course assumes these companies comply with the "request."

Obama Accepts Assistance for BP (NYSE:BP) Oil Spill 70 Days Later

An incredible 70 days after the BP (NYSE:BP) oil spill, Obama has finally made an executive decision to allow international assistance into the region to help deal with it.

Included among those being allowed to help are some countries, and others that are global organizations. It wasn't clear at this writing who the countries were or the organizations, other than Japan.

There are a total of twelve organizations and countries which will get involved, although the government red tape involved in the specifics of it continue to keep the help on the sidelines.

As for Japan, the STate Department said they're going to supply a fire containment boom and two high-speed skimmers.

Even if the ships and other helps were allowed to immediately help, they will have to wait until the detrimental effects of Tropical Storm Alex pass before they could begin their work.

Caterpillar (NYSE:CAT) Adding New Plant in Brazil

Caterpillar (NYSE:CAT) announced Tuesday it will be building a new manufacturing facility in Brazil, as growing demand for mining and construction equipment in Latin America continues to surge.

Although this is a long-term strategy for Caterpillar, Latin America has experienced a fairly strong economic recovery over the last 12 months, and that should continue on for some time, especially in the mining sector, which promises to be robust around the world over the next decade or so.

Even so, sales of equipment to Latin America in May had dropped by 2 percent, highlighting resistance to spending on new equipment by businesses.

Global sales on the other hand made a nice upward move for Caterpillar, increasing by 11 percent in May, although we'll have to wait and see if that's sustainable, as economic conditions are perceived to be worsening rather than getting better.

Products assembled at the new plant will be small wheel loaders and backhoe loaders.

Construction on the new site, which hasn't been chosen yet, is scheduled for some time in the early part of 2011.

BP (NYSE:BP) Oil Spill Worse Because of Government Interference?

A group of British scientists said Monday that the BP (NYSE:BP) oil spill would have been better if it had been left alone by the government, rather than attempting to solve the problem, which probably made it worse.

Past oil spills, according to the scientists, have been proven to be better left alone than interfered with, and responses can make it worse than the oil spill itself.

They say it would've been better to allow the oil to "disperse and evaporate" naturally than to flare the oil and spray dispersants on it.

The only thing they see as being valid intervention would be to keep the oil away from the shores and out at sea while natural forces worked on it.

"One of the problems with this spill is that it has gone from the environmental arena into the economic and political arena, so if you ask how bad it is, that depends on which perspective you're coming from," said Martin Preston, an expert in marine pollution, earth and ocean sciences from Liverpool University.

"Economically, clearly the impact has been very large, but environmentally the jury is still out. One of the tensions between environment and politics is that politicians cannot be seen to be doing nothing, even though doing nothing is sometimes the best option."

This is also similar to the ongoing intervention in financial markets, where a significant number of economists and analysts believed it better for it to work itself out rather than the outrageous spending, which has exasperated, rather than helped the problem.

The issue is the government socializing people to believe they have the answer to everything, rather than people taking the initiative to solve challenges themselves. So when events arise, government action is expected and demanded because of that unfortunate mindset.

According to Simon Boxall, an expert at Britain's National Oceanography Center, experiments since the Exxon Valdez oil spill have concluded it's better to let things take care of themselves naturally, once the spill has happened.

"The chemically cleaned up areas have taken the longest to recover and they are still damaged," Boxall said. "The areas that were left alone actually recovered much quicker."

Concerning the specific BP spill, Boxall added that the oil coming out of it is light crude, and it's much easier to evaporate and break down as it comes to the surface of the Gulf.

Media-created hysteria and the government positioning itself as the savior of mankind seems to have brought things to the place where action is required and expected, and for better or worse, until that changes, we'll continue to be victims of that political ideology.

Liberals, aka, socialists or progressives, have jumped on these types of crises in order to attack free markets and businesses in order to impose a government-run market upon us.

The truth is their ineptness and interference in almost every circumstance makes things worse rather than better, and it's time for us to begin the process of limiting government and realize they're not the answer to these type of things, but part of the problem.

Tuesday, June 29, 2010

BP (NYSE:BP) Halts Skimmers Ships on Bad Weather

Oil skimmers were stopped by BP (NYSE:BP) and sent to share as bad weather from Tropical Storm Alex sends strong winds and high waves to the oil spill region.

BP has stated the storm could hinder operations and keep their effort to install a third oil-capture system on hold, which would bring the amount of oil collected on a daily basis to over 50,000 barrels.

Waves have been as high as 12 feet in a number of places in the Gulf, along with 25 mph winds.

One of the managers of the skimming operations for BP, Wayne Hebert, said there is no way of knowing when the skimming work will resume, as it's completely dependent upon weather conditions.

Democrats Make Bizarre Request to BP (NYSE:BP) Concerning Public Health Response

In a weird attempt to micro-manage BP in their public health response, Democratic Reps. Lois Capps (D-Calif) and Peter Welch (D-Vt.) sent a letter to BP CEO Tony Hayward, requesting he stop using a particular private contractor named Toxicology and Environmental Health (CTEH).

The letter actually cites environmental shill site Greenwire, saying the company has a "a history ... of releasing findings defending the corporate interests that employ them," said the duo.

“By using CTEH, BP is putting its own bottom line ahead of the public’s health. Obtaining accurate and trustworthy data is critical to launching an effective public health response. BP needs to fire CTEH and hire a firm without such a questionable track record."

In other words, at the behest of Greenwire, these Democrats want them to remove the private contractor because they don't give them the politically correct response to their tests.

It's controversial because they don't shill for the radical environmentalists is what it sounds like.

This has got to be one of the stupidest and most irrelevant moves by the Democrats since the oil accident happened.

BP (NYSE:BP) Pays US Government First Bill of $71 Million

BP (NYSE:BP) has reportedly paid their first bill to the U.S. government for initial response to the explosion on the Deepwater Horizon oil rig which resulted in the massive oil spill continuing to empty into the Gulf of Mexico. The first bill was for $71 million.

According to the Associated Press, a second bill is being prepared to be sent to BP, that one for $51.4 million.

The oil containment efforts of BP could be hampered for about a week because of Tropical Storm Alex, which while seemingly not going to enter the area where the oil spill is, will churn up waves as high as 12 feet tall, which would keep them from connected a third system to the well which would add a much higher capture rate of over 50,000 barrels a day.

Alcoa (NYSE:AA) Partner Ma’aden Secures $4.5 Billion in Financing

The board of directors of Saudi state metals producer Ma'aden, approved of $4.5 billion in financing for their joint venture project with Alcoa (NYSE:AA). This should cover the first phase of construction of the project.

About 60 percent of the needed capital for this stage of the project is reflected in the $4.5 billion, with the total cost coming in at $7.5 billion.

Overall costs for the entire project are estimated at $10.8 billion.

Alcoa owns a 25.1 percent stake in the project, while Ma'aden owns the other 74.9 percent.

Is BP (NYSE:BP) Oil Leaking More?

Ever since the underwater robot hit the containment cap on the oil well deep in Gulf waters, the amount of oil BP (NYSE:BP) has been able to capture has dropped about 4,000 barrels a day.

That at least suggests that after the cap was put back on, the efficiency of the system isn't what it had been prior to the accident.

The four days before the accident the oil collection rate had been about 28,000 barrels a day, while after the accident it's been around 24,000 a day.

On Monday that continued, as the combined systems of recovering oil capture 23,395 barrels, again lining up with the levels since the underwater accident.

The amount of oil captured included oil collected and oil flared on the two vessels being used.

Exxon (NYSE:XOM), Shell (NYSE:RDS-A) Could Make BP (NYSE:BP) Bid Says JPMorgan (NYSE:JPM)

Exxon Mobil Corp. (NYSE:XOM) and Royal Dutch Shell (NYSE:RDS-A) could consider acquiring BP (NYSE:BP) in the future, according to Fred Lucas, an analyst for JPMorgan (NYSE:JPM).

BP could be prime for being taken over after losing over $100 billion in market value since the accident on the Deepwater Horizon in the Gulf of Mexico.

If a company could buy out BP at a highly favorable rate, it could largely negate the liabilities the company will face in the years ahead.

Of the two companies with the potential and expertise to buy out BP, Exxon Mobil is the stronger of the two, and could make an offer of shares and cash for the company.

Lucas also said they could spin off the downstream assets of BP, valued at about $50 billion.

Although this is a distinct possibility, Lucas did write it under a potential future scenario and not anything he's heard.

Libya Remains Confident in BP (NYSE:BP)

Libya said that it remains confident in BP (NYSE:BP) continuing operations in the country, according to the leading oil official in the state, Shokri Ghanem.

There will be no hindrance to them continue to drill for oil and gas in the country as a result of that confidence.

Ghanem, who also chairs the National Oil Corp. of Libya said this, “BP has huge capabilities, long-standing experience and high-standard abilities that it could use to tackle the spill and overcome the crisis.”

Libya holds more oil reserves than any other African country, and currently produces 1.55 million barrels daily.

BP (NYSE:BP) Sued by New Orleans Chef Susan Spicer

Well-known New Orleans chef and author Susan Spicer is the latest to sue BP (NYSE:BP) over the Gulf oil spill, alleging the spill is keeping the chefs from obtaining their usual seafood supplies they're accustomed to. It's a class action lawsuit filed by Spicer.

"Much of plaintiff's business is based on the unique quality of Louisiana seafood, as well as the chain of delivery of that resource from the initial harvester (be it fisherman, oyster grower or shrimper)," wrote Spicer's lawyer, Susan Pollack. "Because this chain of delivery cannot be maintained, plaintiff's business has been, and continues to be, materially damaged."

Spicer operates the nationally know "Bayona," based in the French quarter of New Orleans.

Although it wasn't clear how much her business was affected, it seemed the lawsuit was focused on future losses more than losses already incurred.

With lawsuits like this probably going to take years to wind through the system, it was more than likely a step to get the process going than anything else.

BP (NYSE:BP) Getting Close to Relief Well Goal, Storm May Hinder Progress

BP (NYSE:BP) is very close to reaching their goal for the first relief well they're drilling, which is considered the best chance of permanently stopping the flow of oil into the Gulf of Mexico.

They are about 20 feet horizontally from the broken well, although that hasn't changed their target of the early part of August for when it'll be completed.

According to BP Senior Vice President Kent Wells, they will continue drilling an another 900 feet down before they begin their sideways drilling and start to pump in the heavy mud which will be used to plug the leak.

Wells said they still have a lot of confidence in the relief wells doing the job.

There is a second well being dug too, in case the first one doesn't work out.

Sunoco Logistics (NYSE:SXL) Acquires Texon L.P. (NYSE:TXT) Butane Business

A butane blending business of Texon L.P. (NYSE:TXT) is the latest acquisition of Sunoco Logistics (NYSE:SXL), which reportedly bought the unit for $140 million plus inventory.

The acquisition will be funded through a $100 million loan via Sunuco Corp.'s revolving credit facility.

The butane business includes, along with its butane/gas blending technology, several contracts with giant terminal operator who use the technology.

Sunoco and Texon are expected to close the deal on July 1.

Apache (NYSE:APA) Gets UK Approval for Bacchus North Sea Oil Field

Apache (NYSE:APA) has been approved by the UK government to develop the Bacchus oil field in the North Sea, according to a statement made by the Department of Energy and Climate Change.

"Bacchus, along with our Maule discovery, are examples of fields that can be developed economically, utilizing existing infrastructure at Apache's Forties Field," said James L. House, managing director of Apache North Sea.

There is a renewed interest in developing North Sea projects, as demand for oil continues to soar.

The latest licensing round has 356 blocks applied for, the most since licensing was first started in 1964.

There are about 18 million barrels of oil equivalent in the Bacchus field, which Apache has a partnership with Shell U.K., which owns 20 percent, and Endeavour Energy, which owns 10 percent. Apache owns the remaining 70 percent.

BP (NYSE:BP) Oil Hits Mississippi for First Time

The Mississippi mainland has been hit by Gulf oil for the first time, causing tourists to leave the area. Thick, brownish looking oil, along with tar balls, made their way to the Mississippi shoreline.

Major tourist attraction and gambling casino mecca Biloxi also had its first taste of oil, and it has frustrated local officials who say it's almost impossible to reach the government, let along get its help.

Jackson County official John McKay said, "This is the most frustrating process I have experienced. We have asked and asked for an easier process. It's unfortunate that we have to call all day long to get somebody out here the following day."

State and local Mississippi officials continue to complain about the slow response to the migrating oil, with very little in the way of any cleanup efforts at all directed their way.

Monday, June 28, 2010

Vale (NYSE:VALE) CFO Leaves for Other Opportunities

Vale (NYSE:VALE) CFO Fabio de Oliveira Barbosa has reportedly left the company on Monday, according to a filing from the giant mining company.

In a statement Vale said Barbosa is leaving because he's looking for "new professional challenges."

The board of Vale has proposed that Barbosa be replaced by global corporate finance director Guilherme Perboyre Coavalcanti, who has been in that position since 2005.

BP (NYSE:BP) Oil Capture Rate Slowing

At the same time BP (NYSE:BP) cleanup costs are rising on a daily basis, the capture rate of oil has been falling.

Costs on a daily basis over the last three days has been $100 million, while the capture rate of oil has plummeted from 28,570 a day during the week to 23,700 barrels a day through the weekend.

That could be a sign that the underwater robot hitting the containment cap may have resulted in a poorer capture rate when it was put back in place, as it has been down ever since.

Before the accident the oil capture rate was at close to capacity.

Once a couple of new vessels are added to the capture system, estimates are as high as 53,000 barrels a day in oil could be capture, which should give a better idea of how much is actually escaping the well.

Citigroup (NYSE:C) Launches PAA Gas Storage L.P. (NYSE:PNG) Coverage with "Buy" Rating

Citigroup (NYSE:C) has launched its coverage of Gas Storage L.P. (NYSE:PNG), giving them a price target of $25 and a "Buy" rating on top of it.

“We expect the partnership to provide an attractive low-risk total return at current levels through growing cash distributions and moderate unit price appreciation…We believe that the partnership’s low risk operations, long-term contracts, visible expansion projects, strong general partner, and above-average distribution growth of ~6% (versus 4.4% for the peer group) justify PNG’s premium valuation versus its natural gas transportation and storage peers…Unanticipated upside is likely to come from synergistic acquisitions of other natural gas storage facilities and the partnership’s recently formed commercial optimization group. With more than 75% ownership of the limited partner units, the general partner, PAA, is well incentivized to grow distributions. PAA’s long history of successfully acquiring and optimizing crude oil operations, should translate well to PNG’s natural gas storage operations,” said Citigroup analysts.

The company is involved in all aspects of operations of natural gas storage, and leases out pipeline transportation and storage capacity.

Peter Schiff Bullish on Precious Metals, Oil

Peter Schiff stated recently that while he is heavily invested in gold, he is also bullish on other precious metals, and oil as well.

Specific metals identified by Schiff were platinum and silver, although he added he is also bullish on some industrial metals too.

The Gulf oil accident with BP (NYSP:BP) is particularly noteworthy in Schiff's estimate of oil in general, and he said the costs of offshore drilling will skyrocket, including insurance.

There will also be less oil because of the moratorium in the Gulf, which will decrease production if that isn't changed.

Demand for oil from China is a factor as well. So combining what appears to be increased demand and lower supply, and there is nowhere for oil prices to go but up, in Schiff's view.

BP (NYSE:BP) Oil Cleanup Costs Reach $100 Million Daily

The daily cost of cleaning up the oil spill for BP (NYSE:BP) continues to rise, as it has now reached a level of $100 million on a daily basis for the last three days.

So far the oil giant has spent $2.65 billion on cleanup since April 20.

Costs have risen from about $6 million a day right after the spill in the latter part of April, to the $100 million a day mentioned.

If this rate continues, BP could easily spend over double what they already have in less than a month, and if it continue to grow in daily costs, it'll reach much higher.

Noble (NYSE:NE) Acquires FDR Holdings Ltd. for $2.16 Billion

Noble (NYSE:NE) has announced they've acquired privately held FDR Holdings Limited for $2.16 billion.

"Frontier is an excellent strategic addition to Noble's existing asset, customer and employee base," said David W. Williams, Chairman, President and Chief Executive Officer of Noble. "This acquisition is a highly complementary extension of our mid- and deepwater presence and positions us for additional growth in new market segments that can provide further opportunities for Noble and our customers. Noble's historical hallmark of a strong safety culture and our reputation for operational excellence should benefit Frontier's existing customers and drive value for our shareholders."

Along with assuming FDR Holdings debt, financing will also come through cash, drawing on its credit facility, and about $800 million from a bridge credit facility.

Alcoa (NYSE:AA) Acquires Privately Held Traco

Alcoa (NYSE:AA) announced today it has acquired window and door maker Traco. Terms of the deal weren't disclosed.

Traco was launched in 1943 and serves the commercial construction and building market. It'll join the building and construction systems unit of Alcoa.

Although this is obviously a cyclical business Alcoa has acquired, as it is completely dependent on the equally cyclical construction industry, it is a good move for the long term, as eventually the construction market will rebound, and with other recent moves by Alcoa, once it does, they have a number of businesses ready to flourish.

Other deals Alcoa has made are a recent joint venture with JSC United Shipbuilding Corporation of Russia, beginning construction on the Saudi Maaden joint venture, valued at about $10.8 billion.

They've also cut back on can-sheet volumes, saying it wasn't a profitable business for them.

Although near-term prospects for Alcoa are somewhat bleak, they are doing a lot of good things for when there is a sustainable economic rebound, but that seems to be farther off than originally thought.

Additional BP (NYSE:BP) Oil-Capture Capacity Delayed

Tropical Storm Alex, whether it turns toward the BP (NYSE:BP) oil spill or not, has already affected the plans of BP to add capture capacity to the oil spilling into the Gulf.

The company was about to add a third vessel to the oil collection efforts, which had the possibility of capturing the majority of oil escaping into the region.

After the third vessel is hooked up it could capture up to 53,000 barrels a day. Depending on how much is actually escaping into the Gulf, that could cover the vast majority of it.

Up to 60,000 barrels are estimated to be leaking into the Gulf on a daily basis, with worst-case scenario from BP placing it as high as 100,000; although that latter number is doubtful.

Unless the storm changes course, the existing oil-capture systems are expected to be unaffected by the tropical storm.

Waves up to 12 feet high are going to cause the delay of attaching the third vessel to capture oil.

BP (NYSE:BP) Relief Wells and Storm Season

The storm season is rapidly approaching, and there are a number of ways this could disrupt the cleanup efforts of BP (NYSE:BP) as they battle the oil spill.

Most obvious is the attempt to capture as much oil as they can as it continues to spill into the Gulf of Mexico. Tropical Storm Alex, if it does move into the cleanup area, could disrupt the process for about two weeks.

But for the long term and more permanent solution, Alex, and other possible storms could cause the original time period to extend much longer as to how long before they permanently stop the leak.

As important as it is to keep the cleanup efforts going on the existing leak, it's even more important to stop the leak in its tracks.

Up to three tropical storms are projected to hit the Gulf region this season, and if each one were to stop efforts for two weeks, it could cause the relief wells to up to a month and a half to two months longer.

Is BP's (NYSE:BP) Tony Hayward Stepping Down?

News that BP's (NYSE:BP) Tony Hayward is stepping down as CEO of the company have been circulating today, based on a report citing a Russian official set to meet with him Monday.

Russian Deputy Prime Minister Igor Sechin was cited by RIA Novosti, saying "Hayward is leaving his post, he will introduce his successor," referring to when the two would meet today.

American BP spokesman said concerning the report that "They are mistaken." And British BP spokeswoman Carolyn Copland reiterated that, saying the report was ""is definitely not correct," and that "Tony Hayward remains chief executive."

Hayward is meeting with Sechin today over concerns over the health of BP, which is in a joint venture with Russia's TNK-BP. That business accounts for close to 25 percent of all production and reserves of BP.

The idea that Hayward would step down in the midst of the crisis doesn't make sense to most industry watchers, who feel if he does step down at all, it would be after the crisis was handled; at minimum the plugging of the leak in the Gulf of Mexico.

Storm Could Disrupt BP (NYSE:BP) Cleanup for Two Weeks

If Tropical Storm Alex ends up hitting the Gulf of Mexico spill and cleanup area, it could shut things down for a two-week period, although the Helix Q4000, which is the vessel flaring the oil and gas, would be able to stay a few extra days before being moved from the area.

The good news is the storm at this time is gravitating toward Mexico and away from the area, but that's no guarantee it won't change direction sometime soon, as it's a part of the way these storms can behave.

Computer storm models show Tropical Storm Alex moving over the Yucatan Peninsula of Mexico.

Over the weekend sustainable winds of 40 mph were the maximum from the storm system.

Coast Guard Adm. Thad Allen said on Friday the oil well could be left unattended for 14 days.

How BP (NYSE:BP) Would Respond to Storm

The first named tropical storm, Tropical Storm Alex, could disrupt the cleanup efforts of BP (NYSE:BP) in the Gulf of Mexico if it starts to move in that direction.

It isn't clear that the storm will hit the spill area, but if it did, it could arrive in the Gulf of Mexico in the early part of the week. Preparations are being made for that scenario if it happens.

For the Discoverer Enterprise, the first system put in place to capture oil, they would have to be disconnected about 114 hours before the heavy winds hit, while the smaller Helix Q4000 vessel would be removed 56 hours before the storm came.

The most negative aspect of the storm if it does gravitate towards the spill would be the delaying of the arrival of Helix Producer, a vessel which would be able to withstand much harsher weather conditions.

Once the additional vessel is in place and a third system operating, an estimated 53,000 barrels of oil could be captured on a daily basis, which, depending on the actual amount of oil flowing into the Gulf, could capture the bulk of it.

BP (NYSE:BP) Improves Oil Recovery

After the recent setback from an underwater robot hitting a containment cap and stopping the oil recovery efforts by BP (NYSE:BP) from one of their systems, the company is back on track, with Friday's results starting to reach capacity levels again.

If the weather allows it, BP has plans to put another oil capture system in play which will increase levels to over 50,000 barrels a day, which may end up capturing all the oil leaking out of the oil well.

Oil recovery for Friday came in at 24,550 barrels, an increase of about 3.5 percent over Thursday's total, although down from the highs they had before the robotic accident.

For natural gas, BP flared about 54.5 million cubic feet on Friday as well.

Noble Corporation (NYSE:NE): Shark Feeding Frenzy

The sharks have been circling Noble Corporation (NYSE:NE) lately, as a call feeding frenzy has pushed the share price of the offshore drilling contractor up, even though they were recently downgraded by Credit Agricole Securities from "Outperform" to "Underperform."

Stephens & Co. also cut the company from an "Overweight" to an "Equal-weight" on Thursday, and put their 12-month price target on the company at $41. Agricole has a 12-month price target of $32.

These call traders believe the company will surge ahead of the July expiration.

Share were at $29.29 as of 1:43 PM EDT, a gain of $0.83, or 2.92 percent.

Saturday, June 26, 2010

Weekly Results for Newmont (NYSE:NEM), Goldcorp (NYSE:GG) and Barrick (NYSE:ABX)

Newmont Mining (NYSE:NEM), Goldcorp (NYSE:GG) and Barrick Gold (NYSE:ABX) performed in similar fashion throughout the somewhat lackluster week, as all of them plummeted on Monday, remained level for the next three days, and finished the week pushing upwards as gold prices exploded.

Goldcorp struggled more than Barrick and Newmont, finishing the week close to where they started it, while the other two gold mining giants enjoyed gains for the week.

Friday gold prices finished at $1,255.80, rising as high as $1,258 an ounce.

Goldcorp finished the week at $45.42, gaining $1.21, or 2.74 percent on the day.

Newmont ended the week at $61.67, gaining $2.72 on the day, or 4.61 percent.

Barrick finished the week at $46.33, gaining $1.74 on the day, a 3.90 percent increase in share price.

Barrick remains the largest gold miner with a market cap of $45.61 billion.

Eldorado Gold (NYSE:EGO), Yamana Gold (NYSE:AUY), Iamgold (NYSE:IAG) All Down on Week

Mid-tier gold miners Eldorado Gold (NYSE:EGO), Yamana Gold (NYSE:AUY), Iamgold (NYSE:IAG) were never able to recover from the plunge in gold prices Monday, as gold investors took profits, and prices fell.

Even Goldcorp (NYSE:GG) wasn't able to recover to where they started the week at, although major competitors Newmont Mining (NYSE:NEM) and Barrick Gold (NYSE:ABX) ended the week up.

If it wasn't for the strong finish to the week for gold, where prices surged to $1,255.80, most the gold miners would have performed much poorer than they did.

Iamgold (NYSE:IAG) finished the session Friday at $18.57, gaining $0.84, or 4.74 percent.

Eldorado came in at $18.38 at the close of the week, a gain on the day of $0.69, or 3.90 percent.

Yamana ended Friday and the week at $18.57 a share, a gain of $0.35 on the day, or 3.37 percent.

Will BP's (NYSE:BP) Increased Capture Capacity End Spill?

If BP (NYSE:BP) has some luck on their side, next week when they increase their ability to capture oil from the leaking oil well in the Gulf of Mexico, they'll be able to manage the flow for the first time it started leaking into the Gulf.

A lot has to fall in place, and the most important is whether that increased capacity will be enough to cover the amount of oil continuing to empty into the Gulf.

Estimates will have to be fairly accurate for that to happen, and if they are able to cover those projections, for the first time an estimate as to the liability concerning the spill will probably be able to be made; at least as to how the Clean Water Act goes, which could result in billion of dollars in fines, depending on how BP's role in the accident is defined.

The other problem and potential frustration is if they are able to collect the vast majority of oil spilling, and then storms arrive which undo a lot of that progress for a significant period of time.

If they are able to put the new system in place, at least they'll be able to relatively quickly attach and detach to and from the system, which would allow less oil to continue being released.

At this time meteorologists have said it could be the worst storm season in years, and three major ones could hit the Gulf in a major way.

Silver Wheaton (NYSE:SLW) Shoots Up Over 6 Percent

The majority of gold and silver stocks moved in unison last week, as Monday found traders taking profits and gold prices falling quickly, and silver stocks, including Silver Wheaton (NYSE:SLW), dropped with them.

Patterns for gold and silver stock last week was a plunge on Monday, level from Tuesday through Thursday, and most skyrocketing on Friday.

Silver Wheaton was among the leaders in soaring on Friday, jumping to $21.36, an increase of $1.24, or 6.16 percent.

Unfortunately, they still were down on the week, as they never recovered from the continuous drop they experienced until Wednesday, when they leveled off again.

With the news at the end of the week driving the mining and precious metals stocks, Silver Wheaton could get a nice bump starting the week as well, with the prior week's decline coming from the sell-off, which isn't likely to happen on Monday.

Next week should be very interesting for Silver Wheaton and others.

Hecla (NYSE:HL), Silver Wheaton (NYSE:SLW) Lead Silver Stocks Higher

While some silver stocks like Silver Wheaton (NYSE:SLW) and Hecla (NYSE:HL) exploded on Friday, making them among the market leaders, it was amazing to see how the silver miners, and companies like Silver Wheaton performed almost in unison with gold miners.

Just like the gold miners, you had those who started the week with the prices plummeting, and then finished up on Friday strong.

There were those who ended up positive after the relatively level Tuesday, Wednesday and Thursday, only to not reach where they started the week at, and there were those who were able to hang on, like Hecla, who ended the week in the positive even after the poor four days before it.

This tells me of the ongoing price support silver and gold have, and that it isn't going to go away any time soon, and silver companies and silver miners will be a great investment for those having a stake in them.

Others ending Friday up were Pan American Silver (Nasdaq:PAAS) and Silver Standard Resources (Nasdaq:SSRI).

Goldman (NYSE:GS) See Potash Demand Growing at 4 Percent Annual Rate

Goldman Sachs (NYSE:GS) sees the rate of demand for potash fertilizer to grow at an annual rate of four percent over the next several years, citing increasing emerging market food demand as the catalyst.

For the most part, during that time, new capacity shouldn't put any downward pressure on potash prices, as it'll take time for it to come online, so in the short-term is shouldn't be a factor.

In the long term, on the other hand, it could also not be that relevant, as eventually the global economy will rebound, and even if it takes several years, demand will increase, and even with more supply prices could hold up because of that increase in potash demand.

The more important question for existing potash producers is how they'll respond to BHP Billiton's (NYSE:BHP) entry into the market, which over time will definitely be a major player in potash.

Some have started looking for acquisitions to build up scale in order to compete on price if BHP goes that route as their strategy. That's a way away yet, but it is something that must be included in long term strategies by potash companies, who will regret ignoring BHP if that's how they think and respond.

BP (NYSE:BP) Relief Well on Target

BP (NYSE:BP) said Friday their relief well is on target for being completed sometime in the middle of August, based on tests they've concluded.

The relief well is considered the best chance at plugging the well permanently, although the oil leak could be radically reduced by adding another system to capture the oil.

That could result in almost no leakage into the Gulf, but the problem is in not knowing how much is actually escaping and what capture capacity is needed to reduce it almost to nothing.

So even if the relief well doesn't work, first there is a backup well to attempt it again, and second, if neither work, then the capturing of oil should keep it from being a problem.

Of course that doesn't deal with the issue of hurricanes and major storms which would allow oil to release into the Gulf if the relief wells don't work.

The good news is the wells have a high percentage of probability they will work, and so are likely to take care of the problem.

Friday, June 25, 2010

Goldman (NYSE:GS) Continues "Neutral" Rating on Potash (NYSE:POT)

This week Goldman Sachs (NYSE:GS) reiterated their "Neutral" rating on Potash (NYSE:POT), while also setting a price target of $131 a share.

Potash, which is the largest producer of potash fertilizer, has lagged the overall market, as they are down close to ten percent on the year, while the broader market has dropped five percent.

The weak economy continues to hinder the stock, as ongoing uncertainty and conflicting data, which could be interpreted more than one way, generated a sense of chaos and inability to project accurately as to where the economy is really going, and how much demand for products like the potash fertilizer the company produces will grow.

If the company does reach the projected $131 target, it's not going to be in 2010, as in the short term there's not a lot to be positive about in the current economic climate.

Potash was at $95.37 as of 3:39 PM EDT on Friday, a gain of $0.17 or 0.18 percent.

Kenneth Feinberg's BP (NYSE:BP) Escrow Fund Conflict of Interest

How in the world did Kenneth Feinberg's legal firm - Feinberg Rozen LLP - get to oversee the BP (NYSE:BP) escrow fund. It's ridiculous and suspect that he is granted the czar power he has and is able to exercise that power through his own law firm.

Feinberg Rozen has been laughably called an independent intermediary in its relationship to the fund, as Feinberg has already stated he's going to award claimants in a way that would error to their benefit. How is that independent? It isn't of course.

The process is completely one-sided, as BP will have no say in the claims process whatsoever, and Feinberg's firm will decide which claims are legitimate or not and how much of it will be paid via the fund.

That leaves it to be a very subjective operation, which could be used in any way by czar Feinberg to club BP with costs that could be very dubious at best.

Either way, to allow Feinberg to oversee the fund through his own law firm is a conflict of interest that shouldn't have been allowed to happen.

Lawyers Want More of BP (NYSE:BP) Escrow Fund

In an hilarious turn of events, at least in the eyes of tort lawyers, they're "shocked" that the uses of the $20 billion escrow fund by BP (NYSE:BP) will include other uses than compensating the victims of the Gulf tragedy.

What do they mean by that? There isn't as much money for them to confiscate for themselves through the lawsuits they're in the process of initiating.

Since the fund was announced, the uses of it have already been eyed for reasons beyond legitimate victims, it's already created a circus atmosphere around it.

Devastated little environmental lawyer Robert Kennedy, said in a screed, "That was sold to the American public as a compensation fund. And now we have learned that they can use it for whatever the heck they want to use it for."

These lawyers are only made because they've taken on clients pro bono to get their hands on the money, and now the amount of money they can sue for may not even be there, ruining their strategies.

If these lawyers were so concerned, they would lower their usual fees to close to nothing in the face of their purported concerns over the claimants.

After all, how much will be left once the lawyers get their take? We all know the answer to that.

BP (NYSE:BP) Liquidity Under Pressure

The low credit rating of BP (NYSE:BP) which makes debt expensive for them, along with increasing costs of doing business, as in the rising insurance rates.

One means of raising capital to deal with the cleanup costs and current and future liabilities would be to sell off assets, which they're looking at doing, but that takes time, and that doesn't change the need to negotiate to get the best deal they can.

If they don't do that, they could end up with far less to work with than they hoped, which would take away a lot from the purpose of divesting of the assets in the first place.

Equity financing would be out of the question concerning their stock, as share price continues to plummet, so some are thinking alternative equity-related financing, possibly via a sovereign wealth fund would be the way to go.

BP maintains it's on solid financial ground, but the numbers aren't making sense as time goes on, and they're sure to need some round of financing that they can afford, and equity would be the most healthy for the company, as well as the quickest way to do it.

Uranium Resources (Nasdaq:URRE) Closes Public Offering

Uranium Resources, Inc. (Nasdaq:URRE) said today it has closed its underwritten public offering of 23,809,500 shares common stock which was priced at $0.42 a share.

Manager of the offering, Roth Capital, has a 30-day option to acquire an additional 3,333,330 share of common stock on similar terms in order to cover over-allotment of the shares.

After all expenses, the company generated about $9.05 million in the offering.

The capital will be used possible future acquisitions, working capital, and other general business purposes.

BP (NYSE:BP) Stock Hits 14-Year Low - Losing about $100 Billion

Since the April 20 explosion on the Deepwater Horizon oil rig, BP (NYSE:BP) has lost over $100 billion in market capitalization, as it dropped to a 14-year low on Friday.

So far the oil giant has spent about $2.35 billion on the cleanup, and those numbers will continue to skyrocket in the foreseeable future.

Bankruptcy talk continues to swirl about in the media, as the numbers continue to add up concerning potential liabilities, which in a number of scenarios would be unsustainable as far as BP being able to pay them.

The high estimates at this time are at about $100 billion as to how much BP could take on.

Today a spokesman for BP said they have the resources to handle the costs, but the reality is it'll depend upon what scenario plays out going forward.

Will BP (NYSE:BP) Be Bailed Out?

The growing claims, liabilities and cost related to the Gulf of Mexico oil spill, generates the possibility that BP (NYSE:BP) may end up being bailed out using taxpayer dollars if it is to survive, or be able to pay for its responsibilities.

Most Americans would be 100 percent against that, and it's also a question of legality concerning a foreign-based company. But bailouts can be hidden in bills, when you define a bailout as using taxpayer money to prop a company up.

Congressman Ron Paul has stated this has already happened, saying an "'upcoming supplemental bill for Gulf cleanup costs' already has "a large sum of taxpayer money' slipped into it."

One has to start wondering if the Obama administration is demonizing BP to the point where the costs are so high they'll have to declare bankruptcy, and/or be rescued in some way with taxpayer dollars.

The numbers mounting up concerning what they would have to pay out are getting so high, it's hard to see how they'll be able to come close to paying it all out.

Is this a move by the Obama administration to take charge of another major industry in America? They already have their banking pay czar heading up the $20 billion escrow fund from BP.

At this time it's doubtful if a bailout would come in the straight manner as it did in the banking, insurance and auto industries. More than likely, as Ron Paul said, it'll be slipped in here in there in a manner taxpayers won't see it.

If that's how things proceed, it'll eventually be caught onto, and we need to be more diligent than ever to see to it we're not the ones caught holding the BP bill.

Death Threats on Gulf Moratorium Judge

U.S. District Court Judge Martin Feldman, who overturned the Obama moratorium on drilling in over 500 feet of water in the Gulf, now has to have federal marshalls protect him because of death threats against him.

Mainstream media hacks immediately attacked the character of Feldman, not the merits of the ruling, probably adding to the environment of hate now surrounding Feldman.

Now the implications from the mainstream media and their sychophants make them to look the clueless infants they are, as it has been found the assertions made about Feldman, which were to make him look like he was in the back pocket of big oil companies, were based on a few shares he owned in oil stocks in 2008, and nothing that was current.

One writer stated, "Much of the sensational reporting on Feldman’s investments was based on outdated information. The Judge was blasted for owning stock in Transocean, Ltd and Halliburton, two of the major companies involved in the Deepwater Horizon disaster. Feldman owned those stocks in 2008; however, he sold those shares long before issuing his ruling this week. In fact, this updated information will be released in the next report on his stock holdings."

Think of the retractions from the mainstream outlets that will have to be made and how they'll look as far as integrity and quality of research, which will be obviously seen for what it was: no attempt at all to get at the truth, but to employ techniques to smear the character of this bold and honest judge.

BP (NYSE:BP): Bankruptcy a Reality?

As the lawsuits mount and Obama and his administration don't seem to understand BP (NYSE:BP) isn't the Federal Reserve (just can't print money to cover everything), the growing possibility of them going bankrupt increases.

For a time it didn't seem to be a probability, as many kept pointing to how much money the company was generating. But starting with the misguided and coercive methods used to force BP into creating the $20 billion escrow fund, it's all been downhill, and people and institutions are increasingly emboldened to take steps they may not of otherwise taken.

That was especially true after the new escrow czar Ken Feinberg stated he'll error on behalf of claimants in order to get money out quicker. In other words, people and businesses could be paid far more than they are owed in order to move things along. Another reason BP should have never agreed to it.

What happens when the fund runs out after Feinberg's spending spree? He'll come knocking on the door again for BP to put up even more money.

Beyond that, now a New York State pension fund has sued BP, and there will be more of those types of lawsuits to follow. That lawsuit is based upon the fund losing money because BP's share price has fallen. That's being presented under the guise that BP hid from the pension fund that they couldn't handle a major disaster.

The liabilities and lawsuits are becoming an epidemic and not a realistic response from wronged people and businesses.

Politicians, economists, and some analysts, have made assertions that BP can easily handle this and remain a strong and viable company. The problem is it's no longer true.

The problem with all the above saying these things is they're thinking like those used to having the Federal Reserve print out money in attempts to save the economy, banking system, insurance companies, auto companies, etc.

They need to quickly realize that BP doesn't have a printing press like the Federal Reserve, and if things are allowed to go too far, there will be a bankrupt BP which will seek protection in order to survive.

Daily estimates of liability costs continue to soar, and if some of the higher projections prove to be true, it's hard to see how BP could continue operations. In that case everybody loses, and only those in first to get their share of the early money will get anything out of it.

BP (NYSE:BP) Stock Hammered, Hits New Low

BP (NYSE:BP) stock continues to get crushed, as it fell to new lows in the midst of ongoing sell-offs.

The share price fell to a new 52-week low Thursday, falling as far as $28.56 during the session, before closing at $28.74 a share, a 3.1 percent drop.

Since the explosion the the Deepwater Horizon on rig on April 20, the company stock has fallen 52 percent.

Although some analysts have called the stock a "Buy," it's hard to imagine what they're basing that on, as until a firmer grip on the costs of the oil spill happens, it's completely a guess as to what it could ultimately cost BP, and if they'll even survive.

BP (NYSE:BP) Oil Forces Florida Beach to Close

While Mississippi so far has been relatively unaffected by the BP (NYSE:BP) oil spill, Florida and others can't say the same, as a popular Florida beach near the Alabama border was closed on Thursday.

A stretch on Pensacola Beach named Casino Beach, about a quarter of a mile long, was closed after oil washed up along the shore.

The beach usually has hundreds of people enjoying the sand and water, but after the closing, only a couple of people were seen enjoying the sun on the beach.

That was the bottom line for other beaches that were left open. While people could sit in the sun there, it was recommended by health officials that they don't fish or swim in the areas.

ATP (Nasdaq:ATPG) Prices $150 Million Secured Term Loan

ATP Oil & Gas Corporation (Nasdaq:ATPG) said today that they've priced a new $150 million First Lien Senior Secured Term Loan facility, which will replace the prior $100 million revolving credit facility they had.

Chairman and CEO T. Paul Bulmahn said it'll help them defensively and offensively for the business.

“With this new facility, ATP has added more liquidity, flexibility and extended the maturity of its first lien debt. This structure, which is free of financial maintenance covenants, provides the necessary flexibility for us to focus on developing oil and gas assets and creating shareholder value. In addition, the facility offers provisions to expand it incrementally by $350 million which would increase the size of the loan to $500 million as the value of our assets grow. ATP is financially stronger today to capitalize on opportunities that should arise due to the adversity and challenges currently facing the offshore oil and gas industry, said Bulmahn”

The facility will mature on October 15, 2014, and carries an 11 percent coupon with it.

ATP will close the deal by no later than June 30, 2010.

Thursday, June 24, 2010

Natural Gas Inventory Pushes Prices Down

Natural gas inventory showed it was on the higher side of expectations, driving natural gas prices down 1.2 percent on Thursday.

Inventory levels increased by 81 billion cubic feet for the 48 states for the week ending June 18, according to statistics from the Energy Information Administration.

Natural gas storage levels were expected to rise from 78 billion cubic feet to 82 billion cubic feet.

Overall natural gas stockpiles are at 2.624 trillion cubic feet, which is 0.5 percent lower than levels at the same time last year, but over 13 percent higher than the five-year average.

Copper Prices Rising, But Not Demand

Copper prices have risen again today, the third day in a row, even after the horrendous fall in new housing starts, which industry accounts for the majority of copper demand.

Housing starts in the United States plummeted by 33 percent, the largest decline ever.

So the fact that copper prices are going up while demand is going down, tells us that there is something else going on which is driving the price besides demand.

There is of course, and that something is low interest rates, which will continue to drive down the appeal of the U.S. dollar, while driving up the prices of commodities.

This isn't to say that demand for copper won't be relevant, as it's sure to keep a damper on how high copper prices will go. But it does mean copper prices have some room to move up as money looks for a place to grow.

The result of that will bring inflation, and inflation will of course push commodity prices higher overall, even when demand is low. As I said though, demand will affect how far those prices can rise, even in a low-interest rate environment.

Australian Miners Helped by New Prime Minister? No!

The novelty of have Julia Gillard be appointed as the new prime minister is only that: a novelty; at least as far as how it affects mining companies.

Gillard has already committed to pursuing the outrageous policies of Kevin Rudd, who introduced the highly controversial and unwanted super tax on mining companies. There is no change there.

As a matter of fact, some of these mining company leaders are acting like foolish schoolboys, embracing the "conciliatory" tone of Gillard.

Who cares about how nice she says something. What are the miners going to do. Give her anything by batting her political and real eyelashes at them?

It sound similar to Obama in America, who enjoyed the novelty of being voted in as the first black American president, but was given far too much leeway in implementing policies the vast majority of Americans opposed.

Hopefully Australians and mining companies, who largely rejected Rudd, will quickly get the stars out of their eyes and realize Gillard may be even more unyielding in her demands.

Almost falling all over themselves, BHP Billiton (NYSE:BHP) said through a spokesman, "We look forward to working with the government in this new way to find a solution that is in the national interest."

They even suspended an anti-tax advertising campaign because Gillard sounded conciliatory.

Who cares what she sounds like. Her policies are as poisonous as Rudds, and she backs them up just as strongly.

Just because she talks nice doesn't change a thing. Miners and Australians beware! Nothing has changed, and it's just got more dangerous.

Realize it's the opposition that resulted in Rudd's removal, not anything Gillard has to offer. Keep the opposition up and don't cave until she capitulates.

Otherwise you'll end up like Americans who have to unravel all the mess Obama has created in a short 18 months in office.

ConAgra Foods (NYSE:CAG) Fourth-Quarter Profits Plunge

ConAgra Foods (NYSE:CAG) fourth-quarter profits plummeted, dropping 48 percent on declining commercial food sales.

Earnings dropped to $123 million, or 27 cents a share, while after excluding items, profits came to 39 cents a share, down from the 40 cents the street was looking for.

Revenue also plunged by 5 percent, largely on declining sales to restaurants, as people continue to stay home and eat cheaper.

Operating profits in the commercial-foods division, which supplies restaurants, fell 26 percent.

Guidance from the company has them increasing earnings per share by 8 percent to 10 percent from this year. That would be on the lower end or close to equal to the $1.91 analysts are estimating. Their guidance comes to $1.88 to $1.91 a share.

ConAgra's strategy going forward is to focus more on higher-margin branded foods and move shrink their reliance on commercial food sales, which is a low-margin commodity food business.

Judge Rejects Obama Request for Moratorium Stay

The decision by Barack Obama to place a six-month moratorium on deepwater drilling in the Gulf of Mexico was rejected by U.S. District Judge Martin Feldman, resulting in an immediate appeal from the administration.

On Thursday, Judge Feldman rejected the appeal, saying he won't change his decision to block the administration from imposing the ban.

The next step for Obama would be to request the U.S. Court of Appeals for the Fifth Circuit for a stay.

According to the Judge, the decision to ban drilling in the Gulf of Mexico was too arbitrary and all-encompassing, and didn't include the results of inspections by the government which said there were no major problems on the other rigs in the Gulf.

Taking all that into account, Judge Feldman removed the ban, and as of today, keeps his decision in place.

Jim Rogers Long on Commodities

Jim Rogers has been sounding the alarm a long time on the global economy, saying the economic problems will continue as long at there is too much debt and too much reliance upon consumption.

“I’m short stocks and long commodities,” Rogers said in a phone interview. “America of all things they think the solution to too much debt and too much consumption is more debt and more consumption. Which means they are going to print even more money.”

That means a continuing debasement of the currency, and no lasting solutions, as printing money is just another way of kicking the can down the road and passing the problem onto someone else.

Rogers has also said he has no intention of selling his gold.

BP (NYSE:BP) and Cost of Clean Water Act

The accurate measurement of the amount of oil flowing in the Gulf is vital to BP (NYSE:BP) (LON:BP), as for every barrel of oil that leaks into the waters, they could be fined $4,300, according to Clear Water Act penalties.

What determines whether or not BP will be fined is if they are charged with gross negligence. If so, the fine could be imputed on them, although if it got so costly they couldn't afford to pay it, it would be irrelevant, and could drive them to bankruptcy.

Assuming the upper end of government estimates of 60,000 barrels a day being released into the Gulf, and capture rates of a little over 27,000 (at this time), that would leave about 33,000 barrels a day they could be fined for.

That means on a daily basis, the cost to the company could be over $142 million, and that doesn't include the $20 billion in the escrow fund or any litigation costs.

The cost of doing business has skyrocketed as well, with insurance and credit default swaps surging in price.

As a growing number of people are realizing, a lot of the outrage needs to be contained, and if the only focus is to extract as much as they can from the company, there will be no company left to pay it.

It is in the best interests of everyone for BP to survive and thrive, otherwise they won't be able to handle the costs related to the disaster.

BP (NYSE:BP) Collects 40 Percent Less Oil on Wednesday

The amount of oil captured by BP (NYSE:BP) on Wednesday plunged by 40 percent, as an underwater robot hit the containment cap, which ended up shutting down operations on the one system for about 10 hours.

Consequently, only about 16,830 barrels were captured, after two days in a row where the oil giant was able to break their daily record.

BP had to remove the containment cap in order to make sure it wasn't compromised, while also checking to be sure no fluid was escaping, as that could have been disastrous because of the flare up above.

The Q4000, which burns off the oil and gas collected, remained in operation throughout the day.

BP (NYSE:BP) Sued by New York State Pension Fund

In what could become a flurry of lawsuits from pension funds, the New York State Pension Fund has sued BP (NYSE:BP), while the oil continues to flow into the Gulf.

According to Controller Thomas DiNapoli, the pension fund has lost $30 million as shares in BP continue to plummet.

DiNapoli asserted the company mislead investors concerning the safety procedures in place and how effectively it was able to take care of crisis situations like the one they're in.

Since the April 20 explosion of the Deepwater Horizon oil rig, the shares of the company have fallen to about half what they were.

It's hard to tell if lawsuits like this will go anywhere, as the idea a situation happens which drives the share price of a company down can be sued against, makes it almost impossible to do business.

And if a plethora of these types of lawsuits are allowed to go forward, it's questionable as to whether or not BP could survive, including the rest of their liabilities, although there's sure to be some insurance to cover this, probably the reason for the lawsuit in the first place.

Then you also have to ask why the money wasn't moved to another type of investment when those running the fund knew without a doubt it would suffer immensely from the accident.

Obama's BP (NYSE:BP) Oil Spill Mistakes

Obama should have consulted with Ron Paul before attempting to do too much in the Gulf of Mexico, as then he would have kept himself from making too many mistakes.

It's too bad Obama didn't heed his initial thoughts and keep clear of the BP (NYSE:BP) oil spill than he has, as the pressure from the wacky progressive base he has, resulted in one mistake after another in handling the Gulf disaster.

The first mistake was one of omission, where he refused to waive the Jones Act, which forbids foreign vessels from working in U.S. waters. This was an incredibly foolish thing to do, and it was done just to cater to his union base.

If he had allowed the foreign skimmers in, the amount of oil that could have been removed from the Gulf of Mexico would have been enormous, and we may not even be close to having the problems we are having today as a consequence of that inaction.

At the beginning I believe Obama was doing the right thing in calmly watching the situation. But that wasn't enough for his supporters, who pressured him to show some anger, and once he started that, he generated a diplomatic row with Britain that still hasn't been resolved, and left a bad taste in the majority of Americans' mouths for acting the bully.

The decision to keep berms from being built to protect the Louisiana coastline was another enormous error, although it was obviously retracted and the berms were started to be built.

But as of Wednesday, the U.S. Fish and Wildlife division halted some of that in the name of some environmental nonsense, as if the oil filling the coastlines of Louisiana aren't an environmental crisis. This is the same type of idiocy that kept the berms from being built in the first place.

And the shutting down of barges being used to siphon oil from near the coast of Louisiana in order to check for fire extinguishers and life jackets for over 24 hours was another look into Obama not having a handle on things.

The worst of it all though was the imposition of a moratorium which is doing more to harm the Gulf region in relationship to jobs than the oil spill itself.

Ron Paul said about that, "Many have criticized the federal government in the past weeks for not doing enough. The reality is there is only so much government can do to help, yet a lot they can do to prolong the problem and misdirect the pain. For example, in the interest of 'doing something' the administration has enacted a unilateral ban on offshore drilling. This is counterproductive. I am proud to cosponsor legislation to lift that ban. Why punish other oil companies and their hard-working employees who had nothing to do with this disaster, and who have better safety records?."

As Ron Paul says, the best thing in times like these is for government to get out of the way and let those who know what to do - do it.

Ron Paul on BP (NYSE:BP)

While Ron Paul is not an apologist for the Obama administration in any way concerning their handling of the BP (NYSE:BP) oil spill, he does give some insight into BP itself, which is a lot different than the free market corporation it should be.

One problem you have in the Gulf situation is when you reveal one aspect of it you don't like, such as fascism, socialism or crony capitalism, you can give the impression your in support of the other side, when in fact all of it is just a big mess.

With that in mind, it's almost impossible to analyze because the entire thing is built on the wrong practices of government and business combined. So when you deal with one you endlessly have to balance it by saying this doesn't mean you agree with the other side of an issue either.

That's my own thought on it.

I've read a lot of Ron Paul's stuff, and I know he isn't supporting the governments' actions in the Gulf at this time, just because he doesn't like the past actions of BP.

Here's what he said in an article for
"It should be noted that BP is not exactly a bastion of free market capitalism. Rather, they are very vested in acquiring government subsidies, favorably slanted policies, and competition-hobbling regulation.

"BP has even been a major lobbying proponent of cap-and-trade because of certain provisions in the legislation it could profit from. Considering who lobbies for them and what they lobby for, my concern is that attempts to hold them strictly and fully accountable could end up being nothing more than a shell game, with taxpayers ultimately holding the bag."

Suncor (NYSE:SU) Selling Non-Core Bearberry, Ricinus Assets

Suncor Energy (NYSE:SU) said it has reached an agreement with Abu Dhabi National Energy Company PJSC subsidiary, TAQA North, to sell non-core natural gas properties.

The more well-known properties are Ricinus and Bearberry, located in Alberta, Canada.

Although natural gas properties, the current production on the lands is approximately 6,100 barrels of oil equivalent a day.

Suncor, through a variety of non-core transactions, has sold off about $2.4 billion in total assets. They are getting close to completing their overall strategy, as the remaining non-core assets left to sell are located in the North Sea and Western Canada.

Closing date for the deal, which is valued at about $285 million, will be sometime near the end of the third quarter, subject to approval.

BP (NYSE:BP) Cap Operational Again

The cap removed by BP (NYSE:BP) engineers after an underwater robot accident is functional again, and was put back in place as of around 9 PM EDT on Wednesday.

Engineers removed the cap because of concerns over the possibility chrystals could form which would clog the cap, and also they weren't sure if fluid was leaking, which could have generated a safety hazard with flames on the surface.

The system which had the problems was the first one employed in the Gulf by BP, and captures rather than burns the oil off. The second system only burns the oil, as it doesn't have processing or storage facilities.

Concerning removing the cap, managing director for BP, Bob Dudley, who is now heading up the Gulf cleanup effort, said this, "It's a disruption, and the crew again did exactly the right thing because they were concerned about safety. It's a setback, and now we will go back into operation and show how this technology can work."

The robot had bumped into the system a little before 10:00 AM.

Alcoa (NYSE:AA): What's not to Like? Short Term!

Alcoa (NYSE:AA) has been doing a lot of things right over the last several years, and no matter what they do it seems they aren't able to break through and return to the share price they've been accustomed to in the past.

That of course isn't something they have much control over for the most part, and the overall macroeconomic conditions have been prohibitive to them in the industries they serve. That isn't going to change any time soon, even with the attempt by CEO Klaus Kleinfeld's attempt to paint the near future as more rosy than it in reality will be.

Some of the good things Alcoa is doing which will ultimately pay off for them, is the $10.8 Saudi Maaden joint venture, which they've started construction on recently, the JSC Russing Shipbuilding partnership they just announced, and cutting back on can-sheet volumes, which weren't profitable for them.

In other words, they're expanding while cutting costs, and that will definitely pay dividends for them and their shareholders down the road, but there is little in the short term which is positive for the company. They are also increasing scale, which over the long haul should really position them strongly against their competitors.

Hopes of growing demand in China have been dampered some as the country attempts to control the property markets in its urban centers, which have been out of control in the inflationary sense.

That will result in lower aluminum demand, as other raw materials, which should fall below prior expectations. But even if that does materialize, and the demand for aluminum reaches the 10 percent Alcoa is looking for, that doesn't address the slowing U.S. and European markets, which will definitely cut into demand.

Another element that Alcoa has going for it over the long term is the emergence of aluminium ETFs, which will create an entirely new market for the lightweight metal.

While they are buying up aluminum now, their competitor Rusal is the major beneficiary at this time. Word is they are struggling to meet demand there, and that could help Alcoa going forward.

The only other short-term possibility of getting some traction for Alcoa is if the aluminum that is tied up by investors and contracts keeps the demand from being met, even though the supply is at a high level.

That seems unlikely to me, even though some think it's a real possibility.

Either way, Alcoa is doing a lot of good things to prepare for a rebound, and when that rebound comes, their share price should start to fly again.

Those with a long-term outlook could do very well with Alcoa, as it's not if they're going to surge in share price again, it's only a matter of when.

In the short term I think everyone needs to manage their expectations, and if they do fall even further in price, it should definitely be considered a buying opportunity for those looking to place some money in them.

Wednesday, June 23, 2010

Credit Suisse (NYSE:CS) Covering 8 More Oil and Gas Stocks

Credit Suisse (NYSE:CS) has initiated coverage on eight more oil and gas stocks, including Penn Virginia (NYSE:PVA), Berry Petroleum (NYSE:BRY), Comstock Resources (NYSE:CRK), Swift Energy Company (NYSE:SFY), Rosetta Resources (Nasdaq:ROSE), Petroleum Development (Nasdaq:PETD), GMX Resources (Nasdaq:GMXR) and Rex Energy (Nasdaq:REXX).

The giants bank started these five off at "Outperform" ratings: Penn Virginia, Berry Petroleum, Comstock Resources, Swift Energy Company and Rosetta Resources.

Identified as neutral were Petroleum Development, GMX Resources and Rex Energy.

The price target from highest to lowest was Comstock Resources, with a price target of $43, and standing at $22.15 as of 3:13 PM EDT today. The price target for Berry Petroleum is $40, standing today at $30.24, as of 3:11 PM EDT.

Moving to price targets between $30 and $39 a share, we start with Swift Energy Company, with a target of $39 share, and at 29.82 as of 3:17 PM EDT. Next is Penn Virginia, which is expected to reach $33 a share, and is at $22.16 at 3:15 PM EDT. Finally comes Rosetta Resources, which Credit Suisse expects to reach $31, and is at $22.71 at 3:17 PM EDT.

At a price target of $29 a share is Petroleum Development, which stands at 26.19 at 3:20 PM EDT.

Rex Energy as a target of $13 attached to it, which today is at $10.72 a share at 3:21 PM EDT.

Last with an $8 a share price target is GMX Resources, which isn't that far from there, now at 7.12 at 3:22 PM EDT.

Obama Continues Fighting Against Gulf Jobs

Almost immediately after U.S. District Judge Martin Feldman ruled against continuing the Gulf oil moratorium, the Obama administration said they'll challenge it, and they already have.

Small businesses which operate in the Gulf filed the lawsuit to remove the moratorium, noting it's causing the loss of a large number of jobs in the region.

The judge agreed, saying the moratorium was unprecedented in its scope, and indiscriminately included everybody, even businesses that had solid safety records.

There was also a rebuke by the judge, saying there was dishonesty in the assertions made by the administration. That was a reference to leaving out of the proceedings the fact they had checked the rest of the offshore oil rigs in the Gulf and found nothing wrong with them other than a couple of minor infractions.

Interior Secretary Ken Salazar responded, saying he “will issue a new order in the coming days that eliminates any doubt that a moratorium is needed, appropriate, and within our authorities.”

Using their usual thug tactics, Obama and his administration has began an ugly attack on Judge Feldman, with the Associated Press starting it off by implying Feldman was conflicts of interest because he had a small stake in Transocean (NYSE:RIG), which was less than $15,000 in 2008.

The AP report also said Feldman had some interests in Halliburton (NYSE:HAL) and Peabody Energy (NYSE:BUT).

The implication they're trying to imply is Feldman is owned by big oil, and that was the reason behind his decision. No one will be able to prove the Obama administration's hands are in this, but the way it was done and the quickness of the response had their fingerprints everywhere on it.

Either way, the fact that they're aggressively resisting the judge's removal of the moratorium shows they have no real concern for the people of the Gulf, as they're destroying thousands of jobs in the area, which very well could leave the region forever.

Feds Shut Down Sand Berm Efforts: Louisiana Coastline Vulnerable

The incredible ineptness of Obama and the federal government continues to astound, as they have halted the dredging of the Louisiana coastline which was being done to build sand berms to protect them from oil permeating the area.

Since these decisions make no sense, it needs to be investigated whether or not this is being based on ideologies of radical environmentalists which may have infiltrated the U.S. Fish and Wildlife Department, which made the decision.

In a letter to Obama, Plaquemines Parish President Billy Nungesser, said this about halting the effort: "Once again, our government resource agencies, which are intended to protect us, are now leaving us vulnerable to the destruction of our coastline and marshes by the impending oil."

There needs to be an investigation into what is happening here, and why these type of outrageous decisions are being made. The federal government opposed the sand berms in the first place, finally giving in as pressure mounted to get the job done.

The idiotic statement was made that the berms could harm other parts of the environment. How stupid can people get? Of course they're government employees, so it's understandable.

In other words, let's allow the oil to come to wreck the environment, so we don't wreck the environment with sand berms. That's the reasoning, and the Obama administration needs to relieve these people of their duties and positions and start investigating why these outrages continue.

That is of course, unless Obama and the Democrats back these criminal actions.

BP (NYSE:BP) Finally Removes Hayward from Gulf Cleanup Role

Even though BP (NYSE:BP) had reportedly removed CEO Tony Hayward from the cleanup role recently, BP quickly came back and said the reports weren't true, and Hayward was still running things, although there would be a gradual shifting of responsibilities onto Bob Dudley.

That has all changes, and as of today, Dudley is in charge of the Gulf cleanup, as Hayward focuses on his CEO role in the company.

Dudley has been leading the operations of BP in Asia and the Americas, and has been involved with the rough and tumble dealings with the Russians, and was even ordered to stay out of the country.

Dudley will reside over the newly formed Gulf Coast Restoration Organization unit of the company, and will still report directly to Hayward.

"In the near term, my focus will be on listening to stakeholders, so we can address concerns and remove obstacles that get in the way of our effectiveness. And we'll build an organization that over the longer term fulfills BP's commitments to the restore the livelihoods and the environment of the Gulf Coast," Dudley said.

UK, American Tensions Mount over BP (NYSE:BP)

Tensions are still seething below the surface over the inflammatory language used by Obama and his administration over the BP (NYSE:BP) oil spill.

British Prime Minister David Cameron and Obama will hold a bilateral meeting at the G8/G20 summit in Canada, signaling the pressure Cameron is under, who has been considered too soft on Obama when he was trashing the company, identifying it as British Petroleum, years after it shedded that name after becoming a multi-national oil company.

That made it highly personal for the British people, who took it as British-bashing and not anything constructive to handle the actual problem.

Cameron said, "BP itself wants to pay for the clean up. It wants to stop the gushing of oil into the Gulf. But we do want to make sure that it remains a strong and stable company for our benefits, but also for the benefits of the United States."

"It is in all our interests that this company is strong and secure," he added.

The British increasingly feel Obama has been far too harsh on BP, and in fact has needlessly added diplomatic tensions that never needed to be part of the picture.

Obama chastised the oil companies early in the process for pointing fingers at one another, yet he has in fact did the same thing with BP, by pointing the finger at the British, while giving the other oil companies involved a free ride.

Noranda Aluminum (NYSE:NOR) Gets Solid Analyst Marks

Noranda Aluminum (NYSE:NOR) received new coverage from Morgan Stanley (NYSE:MS) and Bank of America (NYSE:BAC), both of which like what they see. Credit Suisse, which already covers Noranda, also gave them solid marks on their near future.

Morgan Stanley just started covering Noranada, and thir first rating for the was an "Overweight," setting a price target of $11.

Bank of America also initiated coverage on Noranda, starting them off with a "Buy" rating, while also looking at a price target of $11 a share.

Finally, Credit Suisse announced they were giving the company an "Outperform," while setting an $11 price target as well.

You don't see a lot of times when analysts all give the same price target for a company, but here you have it in all three cases.

The producer of rolled aluminum coils and other aluminum products was at $7.71 a share, a $0.05 gain, or 0.64% move, as of 12:09 PM EDT.

BP (NYSE:BP) Captures Record 27,100 Barrels Tuesday

For the second day in a row, BP (NYSE:BP) increased its capture rate of oil to a record, as on Tuesday they kept 27,100 barrels of oil from spilling into the Gulf of Mexico.

That includes both systems they're currently using, which either collects it for reselling or burns it off. The original system collects the oil.

Both systems, based on yesterday's capture rate, are operating close to their capacity, with the containment cap system collecting 16,600 barrels, and the second system, 10,500 barrels.

The capacity for the combined oil capture systems is 28,000, with the ability to capture another 900.

A third vessel will be added to the oil capture setup next week, which will bring the total capacity to 53,000 barrels a day. Without an accurate measurement in place as to how much oil is spilling into the Gulf, it's possible the third vessel will help capture all the escaping oil, but that's not a surety at this time.

The next vessel will have the largest capacity of all ships, with the ability to capture 25,000 barrels a day.

Russia Presses Britain on BP (NYSE:BP)

Concerned over the fallout of the BP (NYSE:BP) disaster on the Russian economy, Russian President Dmitry Medvedev seeks to get guarantees from Prime Minister David Cameron concerning the matter.

Russia accounts for 25 percent of the global oil produced by BP, and worries over the company's ability to continue working in Russia in face of the billions in liabilities they face has them pushing for some assurances from the British leader.

Primarily Russia wants to know if BP has plans on cutting back on its oil production, as uncertainty over its ability to fund operations is in the back of their minds.

Some of the asset sales of BP will be Russia-based properties, which they have hopes of raising $10 billion in order to restructure the company so they can successfully pay for the cleanup operations in the Gulf and survive as a company.

One Russian asset BP is sure to keep for the long term will be its joint venture with the privately held TNK consortium, which accounts for 10 percent of BP's profits.

With anger over the oil spill probably lasting for years in the U.S., BP is positioning itself to diversify away from the U.S. market as one of its long-term strategies.

The Russian Ambassador to the UK, said, We want to see how it will work and how this situation will affect the overall strategy of BP and how it may affect these joint ventures in Russia. We want to have some guarantees it will continue to work."

BP's (NYSE:BP) Storm and Containment Strategy

Now that the storm season is almost upon the Gulf of Mexico, BP (NYSE:BP) is working to improve the system it uses to capture oil, while at the same time making it easier for ships and crew to disconnect from them in order to quickly and safely leave.

For the new containment system itself, BP will put a new cap on the leaking oil well which will capture more oil before a storm and after the storm leaves.

Most of these changes are projected to be in place before July.

After these things BP should be able to capture up to 50,000 barrels of oil a day, giving a clearer picture of what is actually leaking into the Gulf, as wells as the liability connected to it.

While a new sensor to measure the oil escaping will be part of the new system, it seems the actual capturing of oil will be the most accurate measurement.

BP (NYSE:BP) Credit Default Swaps Rise Again, This Time On Weather Concerns

Credit default swaps are used by a company like BP (NYSE:BP) to protect against the possibility of defaulting on bonds, and the costs to protect that debt has risen again, this time by 61 basis points, to 539.3 basis points for the oil giant.

Much of this is based upon the potential disruption of their Gulf oil spill cleanup efforts, now that the hurricane and storm season is upon us.

As early as next week the first Atlantic storm may enter the Gulf, with the worst storm season in history possibly happening this year, with up to three major storms projected to impact the Gulf, and consequently, the oil cleanup.

A buyer of bonds is paid the face value by the credit swaps if a borrower doesn't meet their obligations.

The basis point refers to what a company pays to protect $10 million in debt on an annual basis, with one basis point equaling $1,000. So the higher the basis points the higher the cost of protecting the debt.

Since April 20, the cost of protecting debt has risen 12 times what it was at the time, another element added to the costs associated with BP doing business.

Tuesday, June 22, 2010

Freeport-McMoRan (NYSE:FCX), Southern Copper (NASDAQ:SCCO) and Copper Demand

While everyone got excited yesterday over the decision to all the yuan to float more against the U.S. dollar, it didn't take long for the market to realize it wasn't that significant, even though precious metals like copper moved up quickly, and copper-exposed companies like Freeport-McMoRan (NYSE:FCX) and Southern Copper (NASDAQ:SCCO) plunged, after the brief euphoria left the market.

Calls also drove up the price of Southern Copper yesterday. But it's highly unlikely attempts to move the stock up by 14 percent to make a profit will work, as macro-economics simply aren't going to allow that to happen, as there's nothing out there to justify that happening, even if some temporary event or story causes some short-term optimism.

Several things are working against copper, and some of them very specific to demand. There is the Chinese property market inflation worries, which China is cooling off, and which copper demand will decline. The U.S. new housing starts are plunging as well, with the tax credit eliminated, which immediately resulted in 10 percent less starts.

Finally, there's the sovereign debt crisis in Europe, which is so bad it's impossible to know or predict how long that will last, or the real depths of the crisis.

That will keep copper demand in check for an unknown period of time, and there is little if anything that will change that in the short term, and in the long term it doesn't look much better.

Those excited about the decision of the Chinese with the yuan will need to take into account the parameters imposed upon copper and other precious metals by the ongoing recession, and the global situation is tenuous at best, with demand for raw materials far less than projected not that long ago.

Until the larger economic picture improves, Freeport and Southern Copper are going to struggle to grow. The best thing to look for there is probably buying opportunities through low price-points, with a view to the long term.

Short term there isn't much happening with these and other companies which have large exposure to the copper market.

Neither of the two companies mentioned here have done much of anything in share price since October 2009, and that's unlikely to change.

Citigroup (NYSE:C), Morgan Stanley (NYSE:MS) See Higher Aluminum Prices

Contradicting a lot of other aluminum industry watchers, Citigroup (NYSE:C) and Morgan Stanley (NYSE:MS) analysts see aluminum prices pushing much higher based on tightening supplies.

Citigroup goes way out on the limb, saying aluminum prices will skyrocket to $2,500 a metric ton in 2011, while general consensus is aluminum prices will stay between $1,900 to $2,100 through that period of time.

Morgan Stanley isn't that optimistic, but still more optimistic than most others, as they see aluminum surging as high as $2,200 by the end of 2010, and reaching $2,295 in 2011.

The reason for the discrepancy in aluminum price outlook is based on how one interprets the impact of financial arrangements and how much of the high levels of supply will be released into the markets.

Those with lower price views believe there is too much aluminum stockpiled for the agreements in place to hinder the supply that much, which will keep prices lower, while those with the higher outlook believe those agreements and aluminum held by investors will limit the amount of aluminum to be released into the market, even with the near-record inventory.

There is also the aluminum ETFs which are creating an entirely new aluminum market to consider, but it's not clear at this time how that will impact prices short term, although they are sure to long term, as demand grows and battles over who acquires the aluminum supply emerge.

Higher aluminum prices don't guarantee increasing demand though, or necessarily more profits for aluminum suppliers, because if prices indeed go much higher than expected, and macro economic conditions remain the same, companies will cut back on buying aluminum, prices will fall again, and we'll be back to where we are now.

I would be surprised to see the aluminum price increase to the levels Citigroup and Morgan Stanley are projecting, as there seems to be more than enough aluminum supply available even with the physical aluminum that is tied up and not available to the market.

Aluminum Prices Going Nowhere Through 2011

A growing consensus is emerging that aluminum prices over the next couple of years are going to remain largely level, and will fluctuate between $1,900 and $2,100 a ton during that time.

The global economic picture, along with the oversupply of aluminum are the major factors cited by economists and analysts as to the reasons for that outlook.

Within those general parameters, aluminum prices are expected to be volatile, mostly on the ongoing battle of China against inflation in their urban property markets, as well as the continuing European debt crisis.

Although demand has been looking good over the long term, the supply is high, and that is negating the increase in demand as far as aluminum prices go, and new aluminum smelters make supply an issue going forward, as it should increase even more as they go online.

Some erratic pricing behavior for aluminum will arise from the inventory deals which could limit supply during certain periods of time, which will be part of the fluctuation in prices mentioned above, but over time that won't have any significant impact on aluminum prices until demand reaches levels where it can't be supplied, which doesn't look to be any time soon.

One new element which isn't being talked about much yet, but which could dramatically change the aluminum demand picture is the news that new aluminum-backed ETFs are going to launch in the latter part of 2010, which could create the type of demand mentioned, changing the overall picture for aluminum.

In that regard, aluminum suppliers could have a harder time meeting demand in the future, increasing the price, but a lot of things have to fall into place for these ETFs to become major aluminum players; like getting the type of financing to take them through the challenges early stages, which is far from guaranteed at this time, but could end up happening over the next several years.

Aluminum looks good over the long term, along with aluminum producers, but in the short term there's very little to get excited about, other than the shares of aluminum companies going down, which will give investors good entry points to invest.

Law Catching Up with Obama: Judge Lifts Gulf Moratorium

The outrageous behavior of Barack Obama in arrogantly ignoring the law has started to catch up with him, the latest being the lifting of the six-month moratorium on on drilling in the Gulf of Mexico from the BP (NYSE:BP) oil spill.

Parameters of the moratorium were the stoppage of drilling in waters over 500 feet deep, allegedly in order to study how to improve the safey of offshore drilling, even though there had already been an immediate inspections which cleared the remaining oil rigs of any safety concerns, with only two having minor infractions.

New Orleans U.S. District Judge Martin Feldman gave this as his reasoning behind the decision:

“The court is unable to divine or fathom a relationship between the findings and the immense scope of the moratorium. The blanket moratorium, with no parameters, seems to assume that because one rig failed and although no one yet fully knows why, all companies and rigs drilling new wells over 500 feet also universally present an imminent danger.”

The Obama administration said it'll appeal the decision, causing even more hardship for businesses and workers in the Gulf region.