GoM accident fallout limited to BP, so far

Both these companies reported much higher profit rises than consensus analyst forecasts had expected this week. Guess which one was overshadowed by a massive oil spill clean-up?

In fact BP’s 135 per cent increase versus forecasts of 85 per cent compare perfectly well to Shell’s 60 per cent increase versus a 30 per cent forecast.

But investors are of course are concerned about the cost to BP of containing the leak from last week’s Gulf of Mexico accident in which 11 workers are believed to have died – the fallout from which is drawing some rather ominous comparisons to the Exxon Valdez incident.

The Coast Guard helpfully noted that the industry is better prepared now to contain these spills than with that accident, but as the FT’s Lex column writes, the timing was particularly unfortunate for BP ahead of its first quarter results on Monday. The column observes, though, that this “does not look like another Texas city”.

But as many of the oil majors delve into deepwater Gulf of Mexico production and the administration is proposing to open up more offshore areas for drilling, the implications go beyond BP.

Simon Henry, Shell’s chief financial officer, when asked about what the accident might mean for the wider industry, pointed out it was the first such deepwater accident. True, but deepwater GoM exploration is still in its early days.

He added that the industry safety record was excellent and the industry was collectively addressing the problem, with Shell pitching in to offer support.

But as for the long term?

“And we’ll see, as we see more about what happened, what the implications might be,” he said. “But the emphasis is on managing the fallout and the human consequences.”

Still, as the share prices suggest, investors are not panicking about a wider industry effect.

Related links:

BP’s costs growing - FT Energy Source
BP spill moves closer to shore - FT Energy Source

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