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.
Showing posts with label Clean Water Act. Show all posts
Showing posts with label Clean Water Act. Show all posts
Monday, November 1, 2010
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.
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.
Thursday, June 24, 2010
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.
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.
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