Daily Archives: June 17, 2010

Live blog: BP’s Hayward continues on Capitol Hill

June 17, 2010 7:17 pm by Anna Fifield

Anna Fifield is the FT’s US political correspondent and has been covering the Washington end of the BP oil spill since the Deepwater Horizon rig exploded on April 20. She blogged live from the hearing room.

5:28pm: Mr Hayward and the other BP executives were escorted under heavy police and security guard out to black SUVs that were waiting at the nearest exit. One photographer who apparently got too close to Mr Hayward was seen being pushed away from the executives by a Capitol police officer.

And with that, this blog comes to a close.

5:26pm: Mr Stupak is bringing the hearing to a close. “We could go here all night and I’m sure people would like to,” he said, but said that instead lawmakers would have 10 days to ask additional questions.

“I agree we’re the most important committee in Congress but even this committee must come to an end,” he said.

Mr Stupak, however, told Mr Hayward that lawmakers had been frustrated with all his “I don’t know” answers and said he should be better prepared to answer their questions during the next session.

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Live blog: BP’s Tony Hayward on Capitol Hill

June 17, 2010 4:26 pm by Anna Fifield

12:52pm: The hearing was adjourned for another recess as lawmakers return to the House chamber to vote. it will resume at 2pm Washington time.

12:38pm: The hearing soon descended into angry arguing.

“When you became CEO three years ago, you said safety would be your top priority, that you would focus on it like a laser,” Mr Waxman told Mr Hayward. “Have you met that commitment that you made?”

Mr Hayward responded that BP had “made a lot of progress… major changes,” since he became chief executive and said he was “distraught” by the Gulf spill.

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Live-blog: Tony Hayward of BP on Capitol Hill

June 17, 2010 2:29 pm by Anna Fifield

Anna Fifield is the FT’s US political correspondent and has been covering the Washington end of the BP oil spill since the Deepwater Horizon rig exploded on April 20. This was her first post from the hearing room.

11:15am: The press is getting restless. It’s been 75 minutes and we’ve yet to hear a word from Mr Hayward’s mouth. Instead, we’ve got lawmaker after lawmaker repeating the same complaints about BP’s safety standards. One of the protesters in BP overalls has nodded off in the back row.

10:53am: It looks like I was wrong about there being less grandstanding at this subcommittee hearing. The BP is an emotive issue and one where few lawmakers can resist the temptation to hit out at BP or, in a few cases, defend oil companies and attack the Obama administration. An hour into the hearing, we’ve yet to get to Tony Hayward.

10:48am: Bruce Braley, a Republican from Iowa, played videos from two women whose husbands were killed on the Deepwater Horizon rig, saying BP needed to fully understand the impact they had had on families in the Gulf region. They urged lawmakers to let “these powerful oil companies know they will be held accountable for this actions” and asked them to impose harsh punishments on oil companies who breach safety regulations.

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Why not drill the relief wells first?

June 17, 2010 12:19 pm by Kate Mackenzie

The Hill reports that one congressman wants to make it compulsory for relief wells to be drilled alongside producing oil and gas wells, as a failsafe measure:

Sen. Frank Lautenberg (D-N.J.) is floating a bill that would force offshore oil producers to drill so-called relief wells along with their exploration wells, a measure aimed at preventing months-long spills like the one in the Gulf of Mexico.

…

“If relief wells had been in place before the BP rig explosion, the gushing oil could have been stopped in weeks instead of months,” Lautenberg said in a statement, calling his plan a “common-sense step to contain damages that come with the inherently dangerous drilling business.”

As the story says, the relief wells are not expected to be completed until July/August – and as we’ve noted, that refers to the drill time rather than the successful ‘bottom kill’.

So, having a relief well handy would be useful, in the event of future blowouts, would it not?

Maybe not.

Continue reading: “Why not drill the relief wells first?”

Tags: Gulf oil spill
Posted in Oil, Politics | Permalink

Simmons says…

June 17, 2010 11:48 am by Kate Mackenzie

Simmons & Co International, the energy investment bank founded by author and peak oilist Matt Simmons, has announced that Simmons himself is retiring as chairman emeritus there.

This move is perhaps not surprising, as Simmons’ own views have diverged markedly from the bank’s in recent weeks. In fact last month, the bank issued a statement pointing out that its views were not the same as Simmons’:

Recent tragic events in the Gulf of Mexico have led to a period of collective introspection for the industry as well as a surplus of opinions. And sadly, the forensic evidence associated with this tragedy is far from complete and will likely take several months to assemble in order to formulate a more complete and informed narrative.

And then:

Several of the recent statements on the part of Mr. Simmons relating to the Macondo blowout and the implications for the industry and the individual companies involved in this incident are discordant with the views of Simmons & Company International.

And how. Just last week, Simmons & Co raised its recommendation on BP shares from neutral to overweight. Like some other equity analysts, Simmons & Co believe that investors overreacted to BP’s possible risk, making its shares an opportunity; albeit a somewhat risky one.

But this move came after Matt Simmons had for several weeks been voicing the view that the Macondo well casing itself is damaged — something that, if correct, would be a real ‘oilmageddon’.

He also told Fortune magazine last week that BP had about a month before it filed for Chapter 11.

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Posted in Corporate news, Markets, Oil | Permalink

From FT Alphaville June 17, 2010

BP – a line in the sand?

By Neil Hume

There’s been a mixed reaction from City analysts to BP’s decision to halt dividend payments for the rest of the year and pay $20bn into a Gulf of Mexico claims fund.

House broker UBS is hopeful that BP will now be able to normalise its relationship with the White House (emphasis ours throughout):

While BP should expect a significant penalty as a result of its Macondo spill these events have no precedent. In order to try to protect its large US business BP has accepted fairly draconian measures that have little legal enforceability but, we hope, lay the foundations for normalising its relationship with Washington.

While the pressure from Washington has been disastrous for the shares, so in recent days has the self-reinforcing spiral of equity and debt values. Measures to liquidate assets, reduce capex and significantly reduce debt should address these issues and while this impacts growth and multiple we think it should secure value.

While Citigroup says BP has taken a pragmatic decision and the creation of the Independent Claims Fund (ICF) should help calm nerves:

While BP has ceded some control of how claims are administered, at least now we have a short-term path to how financial obligations may be met. Against this year’s forecast $32bn of cashflow, the escrow payments of $5bn and capex of $18bn should be easily accommodated. Financially, the escrow payment of $6bn next year should not impair BP’s ability to reinstitute the dividend – our forecast is for operating cashflow >$40bn in 2011 and free cashflow post capex of $22bn. However, that decision will be taken in the light of how events in the Gulf unfold and may still be politically charged by Q1 next year.

But adds:

Nothing we have learnt today has put more definition around how much the spill will eventually cost BP and our assessment of a cost to shareholders of $40bn and price target of 590p remains intact. In the short term, confirmation that no dividend income will be forthcoming for the rest of the year will reduce BP’s attractions for some shareholders and until we get more definition on costs and damages the stock will continue to react to newsflow.

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Tags: Gulf oil spill
Posted in Corporate news, Markets, Oil, Politics | Permalink

A week is a long time for BP

June 17, 2010 9:24 am by Kate Mackenzie

BP shares are enjoying something of an uptick today:

Yet a week ago, before the dividend fears really took hold, this wouldn’t have been such a good result:

Tags: Gulf oil spill
Posted in Corporate news, Markets | Permalink

Was geology already a problem for deepwater Gulf oil?

June 17, 2010 9:06 am by Kate Mackenzie

Was geology looming as a problem for deepwater production in the Gulf, long before a moratorium and new regulations came into effect?

Last week we wrote that, despite the EIA’s assertions that deepwater Gulf production would help US oil production grow through to at least 2035, the IEA and the MMS both seem to expect output from these developments to peak in a few year’s time (even in an optimistic scenario).

The experience of oil companies in a couple of ultra-deepwater developments suggests that, for whatever reason, these projects don’t always meet expectations.

One of the Gulf’s pioneering ultra-deepwater fields, Thunder Horse (operated and majority-owned, incidentally, by BP) is an example.

Continue reading: “Was geology already a problem for deepwater Gulf oil?”

Tags: Gulf oil spill
Posted in Corporate news, Markets, Oil | Permalink

Live-blogging Tony Hayward’s testimony

June 17, 2010 8:26 am by Kate Mackenzie

FT White House correspondent Anna Fifield will be providing updates on Energy Source live from Tony Hayward’s appearance before a House committee later on Thursday. His prepared statement is online.

The hearing, in front of the House Energy and Commerce Committee’s Subcommittee on Oversight and Investigations, is scheduled to begin at 10am EDT (3pm BST). Streaming video will be available here - if possible, we’ll display it alongside our live blog.

You can also follow us on Twitter for updates.

The subcommittee has also published numerous documents relating to its inquiry.

Posted in Corporate news, Oil, Politics | Permalink