BP Oil

**Rick** · 06-17-2010, 03:49 PM

Originally Posted by Sourdough

I have posed the question of BP's future in Alaska on another forum that has a lot of Alaska oil patch members. If they file bankruptcy or are forced in same, or if they are so asset depleted (cash poor) after the Gulf experience, they will not be growing and expanding in Alaska.

I really doubt that is going to happen unless capping the well becomes impossible. Then they might seek a restructure of debt. But they have equity in excess of $102B with over $96B of that in reserves. They can afford a pretty substantial hit before they would even think of Chapter 13. They spent almost ten and a half billion dollars just in shareholder dividends and ended the year with $8B in cash. So I don't think they are hurting all that bad AT THE MOMENT.

On BP Safety - Hayward was supposed to be the man to clean up BP's safety record. He was brought in as the CEO immediately after all those issues but primarily after the Texas refinery explosion. But he stepped into the helm after having headed up the exploration and production side of the business where all the safety concerns happened. So I'm not all that comfortable that he walks the talk. Browne (former CEO) would have been forced to resign at the end of 2008 because of age but he was pushed aside because of the safety issues.

**Rick** · 06-17-2010, 04:18 PM

T - that article is a bit misleading. In fact, the MMS granted every company exclusions to drill. I've read a lot about this very issue and there are four things I think have played key roles in the exclusions. NOTE: this is just my opinion based on what I've been able to uncover.

1. The petroleum lobby had substantial input into the creation of the permitting process. As a result, the window for MMS to review the permit is extremely short, something like 90 days if I remember correctly, but no time at all to conduct enviro impact studies, safety reviews, etc.. The net affect is the MMS routinely grants exclusions for drilling because they can not meet the window time frames.

2. There seems to be a long standing culture of hand holding between the petroleum industry and MMS. That's a lousy culture for an organization that is supposed to be overseeing an industry. It was so bad that former BP executive Sylvia Baca was appointed Deputy Assistant Secretary to Land and Mineral's Management. She's since been removed but Salazar appointed a former BP exec to oversee MMS a year ago.

3. A lot of graft within MMS. You may remember that a number of folks in MMS were given gifts from the petroleum companies. Things like hunting and fishing trips, Christmas parties, tickets to sporting events. Add in drug use and misuse of federal computers (remember all that?) and it's little wonder there was little oversight.

4. Honest scientists were prevented from doing their job. No one in MMS wanted to see a report that said there would be an impact to drilling. “Under the previous administration, there was a pattern of suppressing science in decisions, and we are working very hard to change the culture and empower scientists in the Department of the Interior.” That was a quote from a spokeswoman for MMS in May of this year. The NOAA was pretty scathing in their report on MMS last year. Here is a portion of it.

"In a letter from September 2009, obtained by The New York Times, NOAA accused the minerals agency of a pattern of understating the likelihood and potential consequences of a major spill in the gulf and understating the frequency of spills that have already occurred there.

The letter accuses the agency of highlighting the safety of offshore oil drilling operations while overlooking more recent evidence to the contrary. The data used by the agency to justify its approval of drilling operations in the gulf play down the fact that spills have been increasing and understate the “risks and impacts of accidental spills,” the letter states. NOAA declined several requests for comment."

Looks like NOAA might have been right.

**BENESSE** · 06-17-2010, 04:23 PM

Originally Posted by Trabitha

Regardless of their record, B...the administration still gave them special exemptions.

This administration is certainly not without blame. (neither was the previous one for that matter)
However, let's keep a sense of proportion about it and do less of finger pointing amongst ourselves and more of where they need to point: BP.
That would be a step in the right direction, IMO.

**Alaskan Survivalist** · 06-17-2010, 04:36 PM

I'm with Sourdough on this one although for a slightly different reason. Whenever the Democrats gain control they shut down all development in Alaska. That is why in many respects we are like a third world nation. People have to realize where all there stuff comes from and quit getting in the way of those that provide it to them. If there is a better way than do it and put oil out of business but don't expect the rest of us to pay for your disconnect from where our opulant lifestyle comes from. When oil ends so does life as you know it. Common sense would dictate it be done as responsible as possible and environmentalists contribute thier knowledge to accomplish that.

**crashdive123** · 06-17-2010, 04:40 PM

Speaking of safety - they were scheduled to receive a big time safety award right around the time of the accident.

From Article: The Interior Department was expected to host an event today to honor BP and other companies for its safety efforts, but the agency has changed its mind. The Interior Department’s Minerals Management Services was expected to host the event today and BP was up for two awards at the event. One of the awards was for “outstanding safety and pollution prevention performance.”

http://www.themaritimelawyer.com/bp-...ear-after-all/

**Rick** · 06-17-2010, 05:16 PM

Oh, man. That is too funny. Thanks, Crash, I needed that chuckle.

**Sourdough** · 06-17-2010, 05:41 PM

I wonder if AIG is holding the counter-party on the derivatives, insuring the dividend and/or the downside on the stock price.

**Rick** · 06-17-2010, 05:48 PM

I just read a great article from MSNBC on the financial health of BP.

"The $20 billion fund BP has set up could be just a down payment on the cost of cleaning up the Gulf spill and paying damage claims. But BP has plenty of cash to draw from, including an average of $20 billion in profits annually, $6 billion in cash and some some 18 billion barrels of proven oil reserves worth $1.2 trillion at current prices.Though the total cost won’t be known until the well is capped, Wall Street is already combing through the company's financial statements and working on spreadsheet scenarios. At Oppenheimer & Co, oil industry analyst Fadel Gheit starts with a worst-case scenario of $6 billion in cleanup costs and $6 billion in damage claims every year for 10 years. That works out to $120 billion.

Even if the payout reaches that level, Gheit said, the company would generate some $14 billion a year of "free cash flow" and still have enough cash to pay shareholders half the $2.6 billion quarterly dividend BP recently suspended."

I don't care who you are those are some impressive numbers.

http://www.msnbc.msn.com/id/37762500...siness/page/2/

**BENESSE** · 06-17-2010, 06:13 PM

Originally Posted by Rick

I just read a great article from MSNBC on the financial health of BP.

I don't care who you are those are some impressive numbers.

Impressive only because of how they achieved them.
The 760 "egregious, willful" safety violations all had to do with saving money in the wrong places--gambling with people's lives and the environment.

**Rick** · 06-17-2010, 10:15 PM

It's impressive for any corporation to achieve that kind of financial success. I do agree with you about their moral compass, however. If they had taken a portion of the money they used to advertise how green they were and actually put a failsafe on the well then ............. Hindsight is such a wonderful thing. It even makes me looks smart....well, almost.

**BENESSE** · 06-18-2010, 07:25 AM

The 760 safety violations through the years were not about their faulty moral compass but concrete, cutting corners type of wrong-doing. If that wasn't heads-up (rather than hindsight) about the kind of company they were I don't know what is.

**Rick** · 06-18-2010, 09:15 AM

We're agreeing, actually. If they didn't have a faulty moral compass they wouldn't have taken those shortcuts. A company is either ethical or it is not. There is no degree of ethical. No "sort of" ethical. Corporations can and do make a nice profit while still operating as a good corporate neighbor and citizen, within the laws, and they do so treating their employees and suppliers in a fair manner. That is or is not ingrained within the corporate culture and it permeates every corner of the company. Sadly, BP misses the mark on ethics.

Another bit of news...Moodies dropped them from Aa2 to A2. That's a pretty substantial drop... 3 notches. That moves them from high quality with very low risk to upper-medium grade with low risk. That will cost them some additional points when they need to borrow.

Tony Hayward is gone. That's my prediction. Once the well is capped and the clean up is well under way he will step aside. Keep an eye on Andy Inglis as the next CEO. He's from the same school as Mr. Hayward and one of the execs that was fast tracked along with Hayward. You heard it here first!

**BENESSE** · 06-18-2010, 09:43 AM

Why would any govt. want to do business with BP knowing their track record? Obviously BP low-balls their costs and is most likely among the lowest bids, but is that worth such a colosal gamble?
It would be like shopping for a brain surgeon strictly based on his fees and disregarding his track record.
Our govt. bears a great deal of responsibility for the irresponsible choices it made and no amount of retrospective rationalization will change that.

**Rick** · 06-18-2010, 12:12 PM

Remember that MMS was part and parcel of the petroleum industry. My momma always said, stupid is as stupid does.

**Justin Case** · 07-07-2010, 09:39 AM

I gotta say, I am a bit surprised, it seems as though the ocean is doing a pretty good job of "Washing" (for lack of a better term), The oil slick, so far, mostly "Tar Balls" have been washing up onto shore, These seem fairly easy to clean up, In fact, I was at a beach in Norther California years ago that had sign up saying that tar balls will be on the beach, these were perm type signs so this was an ongoing thing, Maybe its the calm before the storm, ? I dont know, do you think the big slick of liquid oil will reach shore ? I also have heard that older wells leak oil now and have been leaking oil for many years, I am just hoping that with a little luck, only these tar balls will hit the coast line, Looks like they could just be raked up.