Six months ago, the FT’s analysis of BP’s latest numbers began, Bob Dudley stated that the company had reached a “definite turning point”. How right he was. Unfortunately, the turning was down rather than up. The shares are not quite plumbing the ocean floor of the panic which followed the Macondo well disaster, but despite higher oil prices, the slowly clearing fog of litigation and the continuing sales of assets at prices well beyond book values, they have still managed to plunge by 13 percent in the last two months.
The fall neatly reflects this week’s news of a 13 percent decline in first-quarter profits, while the other oil majors were cleaning up, so to speak. The most charitable description of BP is that it is a company in recovery mode, while us long-suffering shareholders (sic) wait for Dr Dudley’s medicine to take effect. A less charitable conclusion would be that the patient has such a chronic sickness that only major surgery will cure it. Read more
BP is on track to win 11 new leases for oil exploration in the Gulf of Mexico, the FT reports, after lodging the highest bids in all but four of 15 leases in a sale held in New Orleans on Wednesday. The 11 leases would cost $27m if awarded and would require much greater expenditure if BP proceeds to drill wells on them. It remains the largest holder of leases in the gulf, and in October was awarded its first permit to drill in the region since the 2010 disaster on the Deepwater Horizon platform, which BP operated. The leasing round results were announced as a report on lessons from the disaster was published by the National Academies, the US science and engineering advisory body. The expert committee, commissioned by the US interior department, criticised both the companies involved in the accident and offshore regulators and raised the question of whether “the good intentions” of the industry and the authorities would be “a start toward recognition, acceptance, and active management of the risks inherent in offshore oil and gas development, or … a transitory response.”
Decisions made by BP to save time and money on its Macondo well in the Gulf of Mexico were contributing causes of the Deepwater Horizon disaster on April 20 last year, an official US government inquiry has concluded. The FT says final report from the joint investigation of the US Coast Guard and the offshore oil regulator, published on Wednesday, accused BP of failing “to ensure all risks associated with operations on the Deepwater Horizon were as low as reasonably practicable”.The conclusion of the 17-month inquiry cited dozens of failures on the part of BP and other companies, in particular Transocean, the owner and operator of the Deepwater Horizon drilling rig. Halliburton, which worked on the cement job intended to seal the well to prevent leaks, was also blamed for shared responsibility in critical mistakes. BP shares soared 5 per cent on the day, says Reuters, as investors viewed the findings as spreading responsibility more broadly. The report is expected to play an important role in any action by federal prosecutors. Read more
First Marathon Oil, then ConocoPhillips, next BP?
The Lex column doesn’t think further Big Oil break-ups are likely: Read more
Moex Offshore, one of BP’s minority partners in the Macondo well that ruptured in last year’s Gulf of Mexico accident, has agreed to pay the UK oil group $1.1bn to settle all claims between the two companies related to the disaster, BP announced on Friday. The FT reports that Moex Offshore and its affiliates had a 10 per cent interest in the well and were deemed to be liable for a commensurate portion of the costs. BP has so far set aside $41bn for the accident. The settlement excludes punitive damages – which BP does not believe will be payable – and fines, the company said in a statement. The agreement is not an admission of liability by any party regarding the accident, BP added. Read more
BP just can’t keep out of the news these days.
After hitting the Gulf coast with its Macondo well oil spill last year, the oil major as of Saturday was seemingly involved in another major oil-infrastructure fail — the shutdown of its Trans-Alaska pipeline system due to a leak. Read more
The official US inquiry into the Gulf of Mexico oil spill has blamed systemic failures by BP and other companies, warning that industry complacency could cause a similar accident again, reports the FT. According to an advance chapter from the oil spill commission report: ’…most of the mistakes and oversights at [the Macondo well blow-out] can be traced back to a single overarching failure—a failure of management. Better management by BP, Halliburton, and Transocean would almost certainly have prevented the blowout’. While regulators could use the report to favour tougher safety rules, lawmakers are already pressing to relax deepwater drilling restrictions, the WSJ says. Read more
Yes, says Fred Lucas of JPMorgan, who notes that BP is trading on an implied reserve multiple that’s 30 per cent below its peers and equal to ExxonMobil’s long run finding and development costs:
The Macondo well is effectively dead — marking an ‘important milestone’ in the response to the Gulf oil spill, according to President Obama, reports the FT. The announcement ends the 5m barrel leak, which sparked fury among the US public and politicians. BP may not attain closure just yet, though. It’s confirmed that payouts from its $20bn Gulf compensation fund have soared since independent administrators took over, Reuters reports, while it faces a fight to resurrect deepwater drilling off American shores for a good while yet, Bloomberg says. Read more
The incoming boss of BP has been striking a confident tone in recent meetings with City analysts, reports FT Alphaville. The message that Bob Dudley has been keen to convey is that BP is financially sound, the provisions made against the costs of dealing with the aftermath of the Macondo spill should cover the liabilities, and the $30bn disposal programme is going well, according to analysts. And while BP has not made any decision on the optimal size or shape of the business going forward, there is an acknowledgement that it has to change. Read more
BP has published its internal investigation report into the Deepwater Horizon rig disaster in the Gulf of Mexico on 20 April 2010.
The conclusion? Read more
Those of uncharitable disposition might sum up BP’s strategic response to the Gulf of Mexico disaster as follows: remove the Brit with the funny accent and install a Yank as CEO. (And, of course, flog off some assets to help pay for the spill).
But is that really enough? A quick look at the BP share price since the well was finally capped suggests not – the share price has gone nowhere as the graphic below shows. Read more
BP said on Friday that the cost of responding to its Gulf of Mexico oil spill had risen by almost $2bn over the past month to about $8bn, reports the FT. The UK oil and gas group also said that it was in the process of replacing the blow-out preventer that had failed when the leak from the Macondo well began in April. The well was plugged by a “static kill” operation in August. BP added that the relief well that is being drilled as a final corrective measure was expected to intercept the Macondo well in mid-September, weather conditions permitting. Read more
BP and other companies involved in the Gulf of Mexico oil leak suffered their first legal blow on Tuesday when a judicial panel ordered scores of damages lawsuits launched against them to be heard in New Orleans, the FT reports. That’s just the start of what promises to be a long series of court battles over the spill’s aftermath, according to Reuters, as lawyers eye the $20bn fund set aside by BP to cover legal costs. BP even faces complaints from the makers of booms used in the spill response that it suddenly stopped taking deliveries, the WSJ says. Read more
The Justice Department has completed talks with BP on setting up an agreed $20bn fund for clean-up and compensation costs from the Gulf of Mexico spill, but questions remain over how BP will guarantee its obligation to contribute, the WSJ reports. The Obama administration has declined to secure the fund with collateral formed from BP’s US oil-fields if it means the government taking possession of wells. The White House faces a political problem — how to extract payment from BP without looking like its partner in developing the Gulf. Read more
BP has joined Anadarko Petroleum as one of the key gainers in global energy stocks this quarter, Bloomberg reports, as concerns over its response to the Gulf of Mexico spill ease. Other oil majors such as Chevron and Royal Dutch Shell have also risen as fears of tight global regulation have receded. Perhaps not just yet, the FT says — as survey findings indicate a majority of people in the US favour more curbs on drilling. Read more
BP has announced plans to raise an estimated $8.7bn from asset sales, bringing the embattled oil group close to its initial target of raising $10bn from disposals to help pay for the cost of its huge oil spill in the Gulf of Mexico, the FT reports. Most of the cash will come from a $7bn deal with Apache, the US independent oil and gas company, which is buying onshore gas assets in the US, Canada and Egypt.
The Apache deal had been expected to include BP’s stake in Alaska’s Prudhoe Bay field, which would have seen the final deal figure well over $7bn. The FT says Apache and BP were unable to settle on a price. However, WSJ Deal Journal says the Prudhoe Bay aspect fell through because Apache typically prefers to operate the assets they own and it wasn’t certain that they would be operators of the Alaskan field. Read more
President Barack Obama will raise the issue of BP’s alleged role in lobbying for the release of Libyan terrorist Abdel Basset al-Megrahi when he meets UK prime minister David Cameron on Tuesday, reports the FT. The White House said on Monday both leaders would “likely touch on” the Libyan issue in their first official meeting since election. The visit comes just a day after US government officials decided leaks around BP’s capped Macondo were ‘inconsequential’ and posed no threat to the company’s pressure tests. A seep detected three kilometers away, meanwhile, has been classified as unrelated, according to Bloomberg. Read more
The US government on Monday allowed BP to extend for 24 hours the containment cap shutting off the leak from the Macondo well after determining that nearby seepage was not related to pressure tests, the FT says. BP’s shares dropped as much as 5 per cent on the day, after officials voiced those leak concerns. AFP reports that the oil company is now studying the so-called ‘static kill’ operation, which would involve pumping heavy drilling fluids known as mud down the well to stop the flow of oil. Read more
Breaking pre-market news on Monday,
– International Power and GDF Suez Energy International confirm talks on reverse takeover – statement and statements. Read more
David Cameron will this week defend BP on a two-day visit to Washington, insisting the group must have a “stable and strong” future for the sake of the UK economy and the pensioners who rely on its dividends, the FT reports. The oil company successfully capped its Macondo oil well last week, but the BBC reports on Monday that the US government has ordered BP to submit a plan for reopening its capped well, in the event that oil may be seeping out or there may be “undetermined anomalies at the well head.” Read more
Breaking pre-market news on Friday,
- Macondo well integrity test could last 48 hours, BP says — statement. Read more
Introducing the Macondo ‘Costometer’ from Citigroup.
Unfortunately you can’t manipulate the data, but it could be used as the basis for a spreadsheet. Read more
The price action in Falkland Oil & Gas on Monday morning, following news that it had found no hydrocarbons at its Toroa exploration well south of the Islas Malvinas:
Anadarko, the US partner to BP in its ill-fated Macondo well in the Gulf of Mexico, approved several key aspects of the UK company’s designs for the project that have been sharply criticised by Washington lawmakers, the FT says. Anadarko, which owns 25 per cent of Macondo, also knew of significant operational decisions made by BP, according to senior executives at both companies. Read more
. . . because BP could try to protect shareholder value by de-merging its US operations.
That’s the view of Unicredit, which reckons a split is something that the board of BP has to consider, given that its business model (think deepwater exploration, the Gulf of Mexico, technical excellence) has been shredded by the Macondo oil spill: Read more
Gulf Coast states are gearing up to follow small business owners in seeking payouts from BP for lost revenue and other damages stemming from the Gulf of Mexico oil spill, the Wall Street Journal reports. Their demands could exceed the $305m BP has already given some states help pay cleanup costs, the paper says. Separately, the FT says there are concerns that BP’s two relief wells may not work on their first try, leaving open the risk of delays. Read more
Much like the previous sixty-six days of the oil spilling, Friday was a day to forget for BP and its share price.
So it’s… serendipitous that Structured Products’ Clare Dickinson has uncovered a curious reverse convertible referencing the company’s stock, which Royal Bank of Canada is currently offering to US investors. Read more
BP has restarted collecting oil from the Gulf spill, turning around a temporary setback in the operation when a cap placed on the well was damaged, Reuters reports. However, the legal and regulatory hurdles facing the energy giant are becoming more permanent, with New York State’s pension fund the latest to launch a shareholder action against BP, alleging the company misled over its ability to deal with oil leaks, according to the FT. BP had joined other oil companies in using faulty US government projections on potential Gulf spills to prepare for their response, the WSJ reports. Read more