A newspaper in Namibia reported that BP (NYSE:BP) has sold assets in the country, and also in Botswana and Zambia, to oil trader Trafigura. The paper cited a minister from the government as the source.
Claims that Namibia Mines and Energy Minister Isak Katali confirmed the sale was asserted by the paper.
BP spokeswoman Glenda Zvenyika, based in Johannesburg, said, "BP is in the process of selecting a buyer for its assets in five African countries and that's all there is at the moment. Before we make an announcement on the deal, these reports are just speculation."
Zvenyika did reiterate the company is in negotiations to sell the assets in the three countries, and also in Tanzania and Malawi, but at this time there have been no decisions made concerning deals.
BP has a goal of selling off about $30 billion in assets to raise capital to pay for liabilities related to the Gulf oil spill.
Showing posts with label BP Liability. Show all posts
Showing posts with label BP Liability. Show all posts
Friday, November 5, 2010
Tuesday, November 2, 2010
BP (NYSE:BP) Costs Rise to $40 Billion for Gulf Oil Spill
While turning a profit for their latest quarter, BP (NYSE:BP) took another charge of close to $7.7 billion related to the spill, which brings their total costs to an enormous $40 billion so far.
They also turned a profit of $1.785 billion, a major improvement over the last quarter when they had a loss of $16.9 billion.
The extra charge for the quarter was higher than expected because of the company taking longer in September to plug the well than they had anticipated.
BP CEO Bob Dudley said, "We have made good progress during the quarter. This strong operating performance shows the determination of everyone at BP to move the company forward and rebuild confidence after the terrible events of the past six months.
"We have also begun to make important changes in the way we operate across the group ... to ensure that safety and risk management are embedded as the absolute priority for every operation, for every person, throughout BP."
The $40 billion is an estimate as to what the costs of the oil spill will ultimately be, almost 25 percent above previous estimates, and sure to rise.
They also turned a profit of $1.785 billion, a major improvement over the last quarter when they had a loss of $16.9 billion.
The extra charge for the quarter was higher than expected because of the company taking longer in September to plug the well than they had anticipated.
BP CEO Bob Dudley said, "We have made good progress during the quarter. This strong operating performance shows the determination of everyone at BP to move the company forward and rebuild confidence after the terrible events of the past six months.
"We have also begun to make important changes in the way we operate across the group ... to ensure that safety and risk management are embedded as the absolute priority for every operation, for every person, throughout BP."
The $40 billion is an estimate as to what the costs of the oil spill will ultimately be, almost 25 percent above previous estimates, and sure to rise.
Monday, November 1, 2010
BP (NYSE:BP) Starting to Escape "Gross Negligence" Label?
With one of the two key pieces of the failure of BP (NYSE:BP) in relationship to the Gulf oil spill having come to light - the poor cement mixture used by Halliburton (NYSE:HAL) to seal the Macondo oil well - BP could be one step closer to saving billions in fines connected to the Clean Water Act.
The second piece of the puzzle, the blowout preventer, which was provided by Cameron International (NYSE:CAM) is next to be decided upon, and once that is completed, BP will probably be exonerated as far as being considered grossly negligent, as the failure will end up being from contractors rather than BP itself.
That of course doesn't excuse BP from its oversight in the matter, which is where in fact it did fail.
Other major oil companies have noted the same thing, that they will have to be much more diligent in managing contractors than in the past, as that would probably have saved BP from even having experienced what they're now going through.
The second piece of the puzzle, the blowout preventer, which was provided by Cameron International (NYSE:CAM) is next to be decided upon, and once that is completed, BP will probably be exonerated as far as being considered grossly negligent, as the failure will end up being from contractors rather than BP itself.
That of course doesn't excuse BP from its oversight in the matter, which is where in fact it did fail.
Other major oil companies have noted the same thing, that they will have to be much more diligent in managing contractors than in the past, as that would probably have saved BP from even having experienced what they're now going through.
Friday, October 29, 2010
What Will Halliburton's (NYSE:HAL) Failure Cost Them? What Will BP (NYSE:BP) Gain?
The narrative has changed quickly concerning the BP (NYSE:BP) oil spill, as the investigation surrounding the cement job performed by Halliburton (NYSE:HAL) could drastically change the liability outlook.
So far BP has rightly been the main focus of investigations, but that couldn't have remained the case throughout the entirety of the story because of there being so many contractors and others whose equipment and actions may have led to the failure on the Deepwater Horizon oil rig.
Investigators from the oil spill commission have determined the cement used by Halliburton was unstable, and Halliburton has admitted the final formulation used wasn't completed checked for its stability.
While Halliburton continues to dispute whether the actual formula they used is the one being tested, it seems it is close enough or accurate enough to make a judgment over, as the commission, and an independent study by Chevron (NYSE:CVX) seems to have confirmed.
With failures to completely test the mixture, there is no doubt Halliburton will incur some liability in the matter. It's only a matter of how much liability, not if they'll face it. There is also the question of whether they're insured enough to cover the liabilities, or it'll cost their bottom line.
It has already pushed up the costs of doing business through the increase in cost of their credit-default swaps, and there will surely be more to come.
For BP, this could be helpful once liability is determined. Whether or not it comes from an insurer or Halliburton directly, it could ease the liability load for them, and release capital over a period of time.
The other major element in liability is the blowout preventer provided by Cameron International (NYSE:CAM), which also failed to do its job. That's being tested at this time as to why it failed.
Concerning liability, BP has probably seen the worst, and anything like this is positive news for them from a financial perspective, but also helps them some reputationally, as people realize they weren't the sole company responsible for the disaster, and in some cases, like with the cement mixture, was out of their hands.
That does bring up something all oil companies said they've learned from this, and that is they must keep a much closer watch on contractors, even those like Halliburton, who had had a pretty good reputation as far as quality work goes.
So far BP has rightly been the main focus of investigations, but that couldn't have remained the case throughout the entirety of the story because of there being so many contractors and others whose equipment and actions may have led to the failure on the Deepwater Horizon oil rig.
Investigators from the oil spill commission have determined the cement used by Halliburton was unstable, and Halliburton has admitted the final formulation used wasn't completed checked for its stability.
While Halliburton continues to dispute whether the actual formula they used is the one being tested, it seems it is close enough or accurate enough to make a judgment over, as the commission, and an independent study by Chevron (NYSE:CVX) seems to have confirmed.
With failures to completely test the mixture, there is no doubt Halliburton will incur some liability in the matter. It's only a matter of how much liability, not if they'll face it. There is also the question of whether they're insured enough to cover the liabilities, or it'll cost their bottom line.
It has already pushed up the costs of doing business through the increase in cost of their credit-default swaps, and there will surely be more to come.
For BP, this could be helpful once liability is determined. Whether or not it comes from an insurer or Halliburton directly, it could ease the liability load for them, and release capital over a period of time.
The other major element in liability is the blowout preventer provided by Cameron International (NYSE:CAM), which also failed to do its job. That's being tested at this time as to why it failed.
Concerning liability, BP has probably seen the worst, and anything like this is positive news for them from a financial perspective, but also helps them some reputationally, as people realize they weren't the sole company responsible for the disaster, and in some cases, like with the cement mixture, was out of their hands.
That does bring up something all oil companies said they've learned from this, and that is they must keep a much closer watch on contractors, even those like Halliburton, who had had a pretty good reputation as far as quality work goes.
Thursday, October 28, 2010
BP (NYSE:BP) Losing Competitive Advantage to Chevron (NYSE:CVX), Exxon (NYSE:XOM) and Shell (NYSE:RDS-A) in Gulf Drilling
BP (NYSE:BP) rivals Chevron (NYSE:CVX), Exxon (NYSE:XOM) and Shell (NYSE:RDS-A) are using the misfortune of BP to quickly gain a wider competitive advantage in Gulf drilling as the troubled energy company has to focus on other battles and shoring up their reputation.
No government entity or official would likely grant BP a drilling permit in the Gulf of Mexico at this time, while the other companies are applying for permits to drill in the region.
Interestingly, Anadarko (NYSE:APC) has been given a free pass, as they've indicated they're ready to resume drilling in the Gulf even though they are 25 percent owners in the failed Macondo oil well, and their liability and responsibility in the matter is yet to be determined.
This is about resources, and since BP is by far the only company involved able to pay for damages, the others have in general ignored, although they may have to pay BP back before it's all through, although it's expected to be far below anything BP will have to pay.
BP will fall behind their rivals in the Gulf because of the Gulf oil spill, and their competitors will be smart to take advantage of the current conditions to extend their lead over them, which it looks like they're doing.
No government entity or official would likely grant BP a drilling permit in the Gulf of Mexico at this time, while the other companies are applying for permits to drill in the region.
Interestingly, Anadarko (NYSE:APC) has been given a free pass, as they've indicated they're ready to resume drilling in the Gulf even though they are 25 percent owners in the failed Macondo oil well, and their liability and responsibility in the matter is yet to be determined.
This is about resources, and since BP is by far the only company involved able to pay for damages, the others have in general ignored, although they may have to pay BP back before it's all through, although it's expected to be far below anything BP will have to pay.
BP will fall behind their rivals in the Gulf because of the Gulf oil spill, and their competitors will be smart to take advantage of the current conditions to extend their lead over them, which it looks like they're doing.
Monday, October 25, 2010
BP (NYSE:BP) Shares on Hold Until Justice Probe Completed
There are a number of things that need to be resolved before BP's (NYSE:BP) shares will be able to be released from the current constraints on them, not the least of which is the ongoing investigation by the U.S. Justice Department.
An investigation by U.S. Attorney General Eric Holder will determine whether or not BP will be designated as being grossly negligent under the Clean Water Act. If they are, their costs would be up to $17.6 billion.
They would actually be much higher though, as their partners in the failed Macondo well, Anadarko (NYSE:APC) and Mitsui (NASDAQ:MITSY), would be exempt from paying for their part in the mishap because of the terms of the partnership if BP is considered to be grossly negligent in the matter. That could be worth several billion more at minimum to them.
Other potential consequences could be the forfeiture well operating licenses and not being allowed to bid on future government contracts.
Until this is brought to a conclusion, BP shares will continue to underperform.
At this time BP is the largest operator in the Gulf of Mexico.
An investigation by U.S. Attorney General Eric Holder will determine whether or not BP will be designated as being grossly negligent under the Clean Water Act. If they are, their costs would be up to $17.6 billion.
They would actually be much higher though, as their partners in the failed Macondo well, Anadarko (NYSE:APC) and Mitsui (NASDAQ:MITSY), would be exempt from paying for their part in the mishap because of the terms of the partnership if BP is considered to be grossly negligent in the matter. That could be worth several billion more at minimum to them.
Other potential consequences could be the forfeiture well operating licenses and not being allowed to bid on future government contracts.
Until this is brought to a conclusion, BP shares will continue to underperform.
At this time BP is the largest operator in the Gulf of Mexico.
Monday, October 18, 2010
BP (NYSE:BP) Reneging on $75 Million Cap?
In a feisty exchange between a BP (NYSE:BP) lawyer and lawyer for plaintiffs before U.S. District Judge Carl J. Barbier, BP attorney Don Haycraft implied BP could seek to hide behind the $75 million liability cap law under the Oil Pollution Act.
Originally BP had said they wouldn't seek to protect themselves under the cap.
Plaintiffs' attorney Steven Herman responded saying: "We're shocked over here to hear the defendants now bring up this $75 million cap. We were under the impression [the cap] was waived."
Barbier said the American public did have the impression BP was going to waive the cap, paving the way for higher liability payments.
Haycraft responded saying "I know that BP has paid lots and lots and lots" of money at this time in relationship to the oil spill.
When pressed by Herman if BP is prepared to pay all legitimate claims only up to $75 million, Haycraft said he was "not prepared to answer that question in this context."
According to Kenneth Feinberg, who administers the claimant portion of the BP compensation fund, the oil giant has paid out $1.4 billion in claims so far.
Originally BP had said they wouldn't seek to protect themselves under the cap.
Plaintiffs' attorney Steven Herman responded saying: "We're shocked over here to hear the defendants now bring up this $75 million cap. We were under the impression [the cap] was waived."
Barbier said the American public did have the impression BP was going to waive the cap, paving the way for higher liability payments.
Haycraft responded saying "I know that BP has paid lots and lots and lots" of money at this time in relationship to the oil spill.
When pressed by Herman if BP is prepared to pay all legitimate claims only up to $75 million, Haycraft said he was "not prepared to answer that question in this context."
According to Kenneth Feinberg, who administers the claimant portion of the BP compensation fund, the oil giant has paid out $1.4 billion in claims so far.
Friday, October 15, 2010
BP (NYSE:BP) Keeping Deepwater Assets
BP (NYSE:BP) and partner TNK-BP, a joint venture between BP and Russian billionaires, announced today they have a confirmed deal is now in place over some assets held in Venezuela by BP.
The oil giant has been selling a number of assets, and others are on the block, in order to raise around $30 billion to pay for growing liabilities from the Gulf oil spill.
A number of onshore and natural gas assets have already been sold.
With the oil future in deep water though, BP is holding onto those assets, and aren't considering selling them. That includes natural gas deepwater drilling off of Azerbaijan.
Contrary to what appears to be a move away from deepwater drilling, it is in fact expanding fast, as huge resources are believed to be in waters which have had little, if any, exploration done on them.
With the huge known natural gas reserves discovered, many energy companies are doubling their efforts in the much more profitable oil sector.
The oil giant has been selling a number of assets, and others are on the block, in order to raise around $30 billion to pay for growing liabilities from the Gulf oil spill.
A number of onshore and natural gas assets have already been sold.
With the oil future in deep water though, BP is holding onto those assets, and aren't considering selling them. That includes natural gas deepwater drilling off of Azerbaijan.
Contrary to what appears to be a move away from deepwater drilling, it is in fact expanding fast, as huge resources are believed to be in waters which have had little, if any, exploration done on them.
With the huge known natural gas reserves discovered, many energy companies are doubling their efforts in the much more profitable oil sector.
Thursday, October 14, 2010
BP (NYSE:BP) Retirement Savings Lawsuits to be Tried in Texas, Not Chicago
Lawyers for workers filing a class action lawsuit against BP (NYSE:BP) over their retirement savings plans and the losses incurred because of the Gulf oil spill had requested for the case to be tried in Chicago, but the Judicial Panel on Multidistrict Litigation ruled the case will be tried in Houston, Texas.
The Panel said, “Certainly, there are differences between the securities actions and the ERISA actions. Notwithstanding those differences, there is significant overlap between the ERISA and securities actions warranting their concentration in a single docket.”
The retirement plan is managed and administered in Chicago, the reason for the request.
Much of the lawsuits are centered around the pre-spill safety record of BP, and what is being asserted is it made the company a safety risk to investors.
Over $1 billion in value from the retirement plan was lost, according to the complaint.
It isn't clear at this time how the rebound in the share price of BP will affect the lawsuit, as shares have gained a lot back since it bottomed out.
The legal question at hand is whether or not the stock of BP was a good investment in the time period the class action is based upon.
The Panel said, “Certainly, there are differences between the securities actions and the ERISA actions. Notwithstanding those differences, there is significant overlap between the ERISA and securities actions warranting their concentration in a single docket.”
The retirement plan is managed and administered in Chicago, the reason for the request.
Much of the lawsuits are centered around the pre-spill safety record of BP, and what is being asserted is it made the company a safety risk to investors.
Over $1 billion in value from the retirement plan was lost, according to the complaint.
It isn't clear at this time how the rebound in the share price of BP will affect the lawsuit, as shares have gained a lot back since it bottomed out.
The legal question at hand is whether or not the stock of BP was a good investment in the time period the class action is based upon.
Friday, October 8, 2010
BP (NYSE:BP) E-mails with Anadarko (NYSE:APC), MOEX, Could Determine Liability in Oil Spill
BP (NYSE:BP) said via offshore land negotiator Michael Beirne that e-mails between them and Macondo oil well partners Anadarko Petroleum Corp. (NYSE:APC) and MOEX 2007 LLC reveal they were receiving real-time data from the Deepwater Horizon oil rig in the days before the explosion which led to the oil spill in the Gulf of Mexico.
As proceedings go forward, that could be a significant part of determining financial liability for the companies.
So even while BP's costs continue to mount, eventually they could get some relief from their partners, who may have to reimburse them for billions.
The other scenario that could play out is if BP is determined to be grossly negligent in connection to the incident. In that case, their partners via the contract wouldn't be responsible for paying damages, and it could lead to many more billions in fines from the violation of the Clean Water Act.
If that isn't the case, then Anadarko and MOEX, through their majority owned Mitsui & Co (Nasdaq:MITSY), would have to pay their portion of the damages.
Mitsui and Anadarko carry almost the same market cap, so both could be hit hard from it, although Anadarko would be hit the hardest because of their 25 percent stake, as Mitsui only has a 10 percent stake in the well.
As proceedings go forward, that could be a significant part of determining financial liability for the companies.
So even while BP's costs continue to mount, eventually they could get some relief from their partners, who may have to reimburse them for billions.
The other scenario that could play out is if BP is determined to be grossly negligent in connection to the incident. In that case, their partners via the contract wouldn't be responsible for paying damages, and it could lead to many more billions in fines from the violation of the Clean Water Act.
If that isn't the case, then Anadarko and MOEX, through their majority owned Mitsui & Co (Nasdaq:MITSY), would have to pay their portion of the damages.
Mitsui and Anadarko carry almost the same market cap, so both could be hit hard from it, although Anadarko would be hit the hardest because of their 25 percent stake, as Mitsui only has a 10 percent stake in the well.
Monday, October 4, 2010
BP (NYSE:BP) Sells Hess (NYSE:HES) More of Tubular Bells
In an effort to cut back on capital expenditures, BP (NYSE:BP) is looking at reducing how many operatorships it holds in the Gulf of Mexico.
Although BP refused to comment on this strategy, they did confirm they sold a part of their stake in deepwater oil field Tubular Bells to existing partner Hess Corporation (NYSE:HES).
That will double the stake Hess holds in the oil field to 40 percent, with BP's stake dropping to 30 percent.
BP at this time has oil production going at over 20 deepwater offshore wells in the Gulf, the largest operator in the area, and the largest license holder.
The goal concerning capital spending for the year is to cut it by somewhere around 10 percent, as they push toward raising more capital to pay for liabilities connected to the oil spill.
So we should see BP selling more of their operatorships in the Gulf until they reach the desired levels they're comfortable with.
Concerning other assets, those held in Vietnam and Venezuela are reportedly close to receiving a formal offer from TNK-BP this week, which is a joint venture between between and a group of Russian billionaires.
Although BP refused to comment on this strategy, they did confirm they sold a part of their stake in deepwater oil field Tubular Bells to existing partner Hess Corporation (NYSE:HES).
That will double the stake Hess holds in the oil field to 40 percent, with BP's stake dropping to 30 percent.
BP at this time has oil production going at over 20 deepwater offshore wells in the Gulf, the largest operator in the area, and the largest license holder.
The goal concerning capital spending for the year is to cut it by somewhere around 10 percent, as they push toward raising more capital to pay for liabilities connected to the oil spill.
So we should see BP selling more of their operatorships in the Gulf until they reach the desired levels they're comfortable with.
Concerning other assets, those held in Vietnam and Venezuela are reportedly close to receiving a formal offer from TNK-BP this week, which is a joint venture between between and a group of Russian billionaires.
Monday, September 20, 2010
Market Ignores BP (NYSE:BP) After Permanently Killing Oil Well
The news that BP (NYSE:BP) killed their oil well was largely ignored by investors and traders, as their minds were on gold and other more important matters.
Thad Allen, the government point man for the BP oil crisis, announced on Sunday they have officially killed the oil well with the "bottom kill," the final step in the process.
Investors shrugged off the news today, although BP got a bump up early in the trading session, and is up to $38.40, gaining $0.37, or 0.97 percent, as of 12:01 PM EDT.
This was somewhat of an anti-climax concerning the well, as it hasn't leaked oil since July 15, and most considered it a foregone conclusion that the oil giant would be able to successfully complete the task.
BP now can fully focus on the legal aspects of the situation, which is picking speed, and also selling assets to raise capital to pay for legal losses and government fines.
Only a little over 3 million shares had traded hands at about noon today, down from the usual 30 million 3-month average.
Thad Allen, the government point man for the BP oil crisis, announced on Sunday they have officially killed the oil well with the "bottom kill," the final step in the process.
Investors shrugged off the news today, although BP got a bump up early in the trading session, and is up to $38.40, gaining $0.37, or 0.97 percent, as of 12:01 PM EDT.
This was somewhat of an anti-climax concerning the well, as it hasn't leaked oil since July 15, and most considered it a foregone conclusion that the oil giant would be able to successfully complete the task.
BP now can fully focus on the legal aspects of the situation, which is picking speed, and also selling assets to raise capital to pay for legal losses and government fines.
Only a little over 3 million shares had traded hands at about noon today, down from the usual 30 million 3-month average.
Friday, September 17, 2010
BP (NYSE:BP) Manipulated Alabama Governor Says Attorney General
The battle of words between the Governor of Alabama, Bob Riley, and Attorney General Troy King has reached fever pitch, as they're slamming each other through the media, with the latest volley coming from King, who said the governor had been manipulated by BP (NYSE:BP) over the oil spill.
Against the wishes of Riley, who was in the midst of negotiations with BP for payment, King decided to file a lawsuit, which complicated the matter and caused lawyers of BP to advise them to stop the negotiations.
Riley blasted King yesterday for being responsible for budget cuts that wouldn't have happened if he hadn't filed the lawsuit.
King claims Riley should have used the lawsuit as leverage against BP, rather than criticising him for it.
Alabama made a claim against BP for $148 million for tax losses.
Against the wishes of Riley, who was in the midst of negotiations with BP for payment, King decided to file a lawsuit, which complicated the matter and caused lawyers of BP to advise them to stop the negotiations.
Riley blasted King yesterday for being responsible for budget cuts that wouldn't have happened if he hadn't filed the lawsuit.
King claims Riley should have used the lawsuit as leverage against BP, rather than criticising him for it.
Alabama made a claim against BP for $148 million for tax losses.
Tuesday, September 14, 2010
Halliburton (NYSE:HAL), Transocean (NYSE:RIG), BP (NYSE:BP) Say Victims May Not Have Right To Sue
Saying alleged victims of the oil spill should go through the process of making claims through the BP (NYSE:BP) compensation fund, BP (NYSE:BP), Halliburton (NYSE:HAL) and Transocean (NYSE:RIG) say they may not have the right to sue until that happens.
Most of this is surrounding those claiming they incurred economic losses from the disaster.
It is hard to understand why anyone would hire a lawyer before going through the claims process first, as if they're denied, they can then hire a lawyer to file a lawsuit if they choose.
Lawyers are obviously talking them out of that so they can get their piece of the action.
Most will find out they're going to get less and take much longer if they go the lawsuit route.
The oil companies say they want a decision to be made concerning whether or not some of the individuals and businesses claiming economic losses must go through the claims process first.
With lawsuits reaching the discovery stage, they want that to be determined before handing over documents and electronic communication reports to the plaintiffs.
Those making claims against the BP compensation fund can find out within a 90-day period whether or not they've been accepted or denied.
Most of this is surrounding those claiming they incurred economic losses from the disaster.
It is hard to understand why anyone would hire a lawyer before going through the claims process first, as if they're denied, they can then hire a lawyer to file a lawsuit if they choose.
Lawyers are obviously talking them out of that so they can get their piece of the action.
Most will find out they're going to get less and take much longer if they go the lawsuit route.
The oil companies say they want a decision to be made concerning whether or not some of the individuals and businesses claiming economic losses must go through the claims process first.
With lawsuits reaching the discovery stage, they want that to be determined before handing over documents and electronic communication reports to the plaintiffs.
Those making claims against the BP compensation fund can find out within a 90-day period whether or not they've been accepted or denied.
Monday, September 13, 2010
FBR on Transocean (NYSE:RIG), BP (NYSE:BP) Indemnity Battle
With the stock of Transocean (NYSE:RIG) discounting $6 to $7 billion in relationship to potential liabilities in the BP oil spill, FBR Capital said it's probably going to be far lower than that.
FBR stated, "The primary conclusions from our recent series of meetings with legal experts in the Gulf Coast are that Transocean's legal liability is likely to be far lower than the $6 billion to $7 billion presently discounted in the stock, but that the issues are incredibly complex. Transocean seems to be protected both by the law and by its contract with BP from bearing substantial liability for the spill. Under OPA, Transocean is not a responsible party for pollution emanating from the well."
Even so, the contract between BP and Transocean may not protect them, as there have been court cases in the past where indemnification has been disallowed. If BP chose to, they could attempt to legally penetrate Transocean’s indemnity.
The question is whether the financial incentive is worthwhile taking the action.
FBR concluded: "However, we do not believe that BP has enough financial incentive to pursue Transocean for contribution claiming gross negligence as this could open BP up to an additional $16 billion in fines under the Clean Water Act (CWA). With Transocean having a book value of $21 billion and a market capitalization of $18 billion, it could hand over the keys to BP and it would not offset the financial risk to BP that it might be found to be grossly negligent under the CWA."
In other words, it's highly unlikely BP and Transocean will ever go to court over this.
FBR stated, "The primary conclusions from our recent series of meetings with legal experts in the Gulf Coast are that Transocean's legal liability is likely to be far lower than the $6 billion to $7 billion presently discounted in the stock, but that the issues are incredibly complex. Transocean seems to be protected both by the law and by its contract with BP from bearing substantial liability for the spill. Under OPA, Transocean is not a responsible party for pollution emanating from the well."
Even so, the contract between BP and Transocean may not protect them, as there have been court cases in the past where indemnification has been disallowed. If BP chose to, they could attempt to legally penetrate Transocean’s indemnity.
The question is whether the financial incentive is worthwhile taking the action.
FBR concluded: "However, we do not believe that BP has enough financial incentive to pursue Transocean for contribution claiming gross negligence as this could open BP up to an additional $16 billion in fines under the Clean Water Act (CWA). With Transocean having a book value of $21 billion and a market capitalization of $18 billion, it could hand over the keys to BP and it would not offset the financial risk to BP that it might be found to be grossly negligent under the CWA."
In other words, it's highly unlikely BP and Transocean will ever go to court over this.
Friday, September 10, 2010
Transocean (NYSE:RIG), Anadarko (NYSE:APC) Jump on FBR Capital Comments
Comments from analysts at FBR Capital concerning the liability of Transocean (NYSE:RIG) Anadarko Petroleum Corporation (NYSE:APC) in the BP (NYSE:BP) oil spill, caused the share prices of the companies to move up, with Transocean exploding upward.
In the case of Transocean, the big move seems to be related to the share price being discounted too much, with investors thinking they would be liable for up to $7 billion.
FBR believed they're more likely to come to a settlement with BP for somewhere from $1 billion to $2 billion at top, which grabbed the attention of investor who stampeded to the stock, which is already far above the 3-month trading volume average.
"...we believe it seems reasonable to assume that Transocean might settle with BP for between $1 billion and $2 billion," said FBR Capital analysts.
In the case of Anadarko Petroleum, which owns 25 percent of the Macondo oil well, FBR said they think they'll settle with BP from between $2 billion to $4 billion.
In the case of Transocean, the big move seems to be related to the share price being discounted too much, with investors thinking they would be liable for up to $7 billion.
FBR believed they're more likely to come to a settlement with BP for somewhere from $1 billion to $2 billion at top, which grabbed the attention of investor who stampeded to the stock, which is already far above the 3-month trading volume average.
"...we believe it seems reasonable to assume that Transocean might settle with BP for between $1 billion and $2 billion," said FBR Capital analysts.
In the case of Anadarko Petroleum, which owns 25 percent of the Macondo oil well, FBR said they think they'll settle with BP from between $2 billion to $4 billion.
Thursday, September 9, 2010
JP Morgan's (NYSE:JPM) Analysis of BP (NYSE:BP) Report
Several financial institutions responded positively to the BP (NYSE:BP) report, not necessarily to its content, but to its purpose, and JP Morgan (NYSE:JPM), along with others, believe BP made a solid move toward defining the narrative.
Morgan said, “In a stock market that has been critically short accurate information on a highly technical event, today’s report is another important step forward (along with capping the well on 15 July). We believe Chapter 1 of this event was trying to quantify the total gross liabilities. In our view, Chapter 2 is about understanding cause and apportioning responsibilities. We will then reach Chapter 3 – settlements.”
Chapter 2, as defined by JP Morgan, is where BP is at now, and if they're successful, they will have moved billions of dollars in responsibility from themselves and spread it to partners and contractors who were part of the operations leading to the failed oil rig.
The major hurdle is positioning themselves as strongly as they can to avoid being designated as being grossly negligent in the accident. The report was directly aiming at that, as well as the secondary issue of pointing the finger at others without seeming to accuse them of anything; they used the technical evidence and reports on other failures to do the job.
Halliburton (NYSE:HAL) and Transocean (NYSE:RIG) went on the offensive almost immediately, as they were specifically singled out as failing at their jobs in specific points leading to the explosion.
Morgan said, “In a stock market that has been critically short accurate information on a highly technical event, today’s report is another important step forward (along with capping the well on 15 July). We believe Chapter 1 of this event was trying to quantify the total gross liabilities. In our view, Chapter 2 is about understanding cause and apportioning responsibilities. We will then reach Chapter 3 – settlements.”
Chapter 2, as defined by JP Morgan, is where BP is at now, and if they're successful, they will have moved billions of dollars in responsibility from themselves and spread it to partners and contractors who were part of the operations leading to the failed oil rig.
The major hurdle is positioning themselves as strongly as they can to avoid being designated as being grossly negligent in the accident. The report was directly aiming at that, as well as the secondary issue of pointing the finger at others without seeming to accuse them of anything; they used the technical evidence and reports on other failures to do the job.
Halliburton (NYSE:HAL) and Transocean (NYSE:RIG) went on the offensive almost immediately, as they were specifically singled out as failing at their jobs in specific points leading to the explosion.
Tuesday, September 7, 2010
BP's (NYSE:BP) Internal Report to be Released Wednesday
While it won't be the final word on the matter, the internal report from BP (NYSE:BP) which investigated the causes which led up to the explosion on the Deepwater Horizon oil rig, will be released Wednesday morning, and should give a preliminary look at what went wrong.
One major piece of the puzzle missing from the report is the blowout preventer, which is considered the key piece of evidence in what went wrong that day.
The failed blowout preventer was raised from the Gulf bottom during the weekend and FBI agents were on board the BP vessel 'Helix Q4000' to take charge of it.
There has been some concern from other companies with potential liability in the oil well, like Anadarko (NYSE:APC) and Cameron International (NYSE:CAM) on how the blowout preventer will be examined.
The Department of Justice, which now has control of the preventer, hasn't communicated how it's going to proceed with the investigation at this time.
One major piece of the puzzle missing from the report is the blowout preventer, which is considered the key piece of evidence in what went wrong that day.
The failed blowout preventer was raised from the Gulf bottom during the weekend and FBI agents were on board the BP vessel 'Helix Q4000' to take charge of it.
There has been some concern from other companies with potential liability in the oil well, like Anadarko (NYSE:APC) and Cameron International (NYSE:CAM) on how the blowout preventer will be examined.
The Department of Justice, which now has control of the preventer, hasn't communicated how it's going to proceed with the investigation at this time.
Monday, September 6, 2010
Impact of BP (NYSE:BP) Assets Sales on the Company
A number of clueless media outlets, mostly mainstream, have castigated BP (NYSE:BP) once again when they recently stated they would struggle to pay their liabilities if they were cut off from new drilling permits and projects in the Gulf of Mexico. The implication was they were blackmailing the country.
This is a completed ignorant assertion and can't even be taken seriously by anyone who understands business.
We have to go back to the promise by the Obama administration that a healthy BP is in the best interests of the country, as they not only provide thousands of jobs, but really would struggle to survive and pay out claims, lawsuits and other liabilities if there aren't new sources of business for them.
For example, they said when their target was at $30 billion to deal with Gulf damages, it would cut their production by 8 percent. That's 8 percent less revenue they would get after the sales were completed.
Now they said over the weekend they're raising their assets sales target to $40 billion, which will raise the loss of production numbers up to about $11 billion, depending on the particular assets sold.
Most people don't understand that every time they sell an asset they lose revenue and profits. All of that goes to unproductive, but necessary, pay outs for damages. The problem is there's a point of no return if they get too weak, and at that time even if they continue to have the will to pay, they won't be able to do it if costs raise to extremely high levels with much less earnings to pay for them.
This is a completed ignorant assertion and can't even be taken seriously by anyone who understands business.
We have to go back to the promise by the Obama administration that a healthy BP is in the best interests of the country, as they not only provide thousands of jobs, but really would struggle to survive and pay out claims, lawsuits and other liabilities if there aren't new sources of business for them.
For example, they said when their target was at $30 billion to deal with Gulf damages, it would cut their production by 8 percent. That's 8 percent less revenue they would get after the sales were completed.
Now they said over the weekend they're raising their assets sales target to $40 billion, which will raise the loss of production numbers up to about $11 billion, depending on the particular assets sold.
Most people don't understand that every time they sell an asset they lose revenue and profits. All of that goes to unproductive, but necessary, pay outs for damages. The problem is there's a point of no return if they get too weak, and at that time even if they continue to have the will to pay, they won't be able to do it if costs raise to extremely high levels with much less earnings to pay for them.
Thursday, August 26, 2010
BP (NYSE:BP) Hiding Something with Relief Wells?
In another instance which seems to point to BP (NYSE:BP) always having something else in mind besides using the relief wells for the "bottom kill," which would be a guaranteed permanent sealing of the oil well.
When asked about this by federal investigators looking into the causes of the explosion on the Deepwater Horizon oil rig, BP Senior Vice President Kent Wells skirted around the issue and didn't commit to anything.
Wells said, there are "multiple options" to stop the flow of oil and the relief wells are "the ultimate backup if everything else fails."
Some think this represents a behind the scenes battle between government point man Thad Allen and BP, but if you've followed this story, Allen had been speaking in similar terms not that long ago.
I think all parties involved want to be able to extract the remaining gas and oil in the well to help pay for the liabilities incurred by the spill.
It seems they're hoping as the process advances that people will be more open to having that be the case, as it makes sense to do that and not waste the resource because of the bad circumstances surrounding it.
When asked about this by federal investigators looking into the causes of the explosion on the Deepwater Horizon oil rig, BP Senior Vice President Kent Wells skirted around the issue and didn't commit to anything.
Wells said, there are "multiple options" to stop the flow of oil and the relief wells are "the ultimate backup if everything else fails."
Some think this represents a behind the scenes battle between government point man Thad Allen and BP, but if you've followed this story, Allen had been speaking in similar terms not that long ago.
I think all parties involved want to be able to extract the remaining gas and oil in the well to help pay for the liabilities incurred by the spill.
It seems they're hoping as the process advances that people will be more open to having that be the case, as it makes sense to do that and not waste the resource because of the bad circumstances surrounding it.
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