BP - off the hook ? ...and a BUY ?

1echidna

Thanks James. A little flavour of the way public sentiment has developed in the US
http://www.cbsnews.com/stories/2010/05/24/national/main6514757.shtml

JamesU

1echidna wrote: »

Thanks James. A little flavour of the way public sentiment has developed in the US
http://www.cbsnews.com/stories/2010/05/24/national/main6514757.shtml

Read about this lunchtime and this cbs stuff is worse. Share price might be impacted a lot more yet.

JamesU

tradetime

Yes yank politicians seem to do little but grandstand to the populist anger that they create, been watching it for months now with the financial industry. I guess ours probably do it too, but I don't really watch them.

sabretoothtigger

The CBS 60 min interview with the guy who had to jump off the edge of the rig was pretty informative


They discuss it some more on this tip I spotted

Transocean Shares Could Come Back
FBR Capital upgraded the driller to Outperform from Market Perform.



Transocean (RIG: NYSE)
By FBR Capital Markets ($59.24, May 24, 2010)

WE BELIEVE THAT THE REASON that the Deepwater Horizon's blowout preventer (BOP) was unable to seal the well is most likely due to it being obstructed by gas hydrate formation.

All of the conditions for hydrate problems were present at Macondo: gas; water; time (waiting for cement to harden); high pressure; and low temperatures.


The possibility of poor maintenance of the blowout preventer has been prominently featured in recent Congressional hearings and media reports, and it has raised investor worry that Transocean (ticker: RIG) might have some liability as a result. Should it be shown that the blind shear rams, which were tested less than 10 hours before the blowout, were obstructed by hydrates, there should be substantial upside for Transocean, as the shares have underperformed their peers by 15% since the blowout.

We are thus upgrading Transocean back to Outperform, from Market Perform, as we believe all of the evidence points toward the relevant part of the BOP working correctly.

A BP document released by Congress indicates that an influx of gas in the mud could have been circulated up inside the BOP. Wellbore circulation was stopped for the next 15 hours, time for that mud to possibly cool down to the frigid temperatures at the seabed. Our calculation of the annular volumes supports BP's document, as does gas being circulated to the surface nearly two hours before the blowout.
According to ExproBase, "... the high hydrostatic pressure and low seabed temperature can cause hydrates to form. The most dangerous situation occurs when circulation stops," which seems to have been present at Macondo. The site also says that "choke and kill lines and BOP stacks are particularly vulnerable since they are located where the temperature is the lowest and (they) cool quickly."
The rig's daily report released by Congress indicates that the rig was preparing to pump seawater down the boost, choke, and kill lines that attach to the BOP. This would add more seawater to already cold possibly gas-laced mud, potentially causing more hydrate formation in the BOP.
We believe that hydrate formation could explain the anomalous pressure reading that BP disclosed during Congressional hearings, where 1,400 pounds per square inch (psi) was noted inside the drill pipe, but no pressure was measured through the kill line. Numerous reports of such hydrate plugging exist in the technical literature.
Since the blowout of the MC-252 well, Transocean shares are down 36%, meaningfully more than deepwater drilling contractor peers Diamond Offshore Drilling (DO) (rated at Market Perform) and SeaDrill (SDRL) who are down on average 21%.
Our $87 price target on Transocean now represents 47% potential upside, and we thus rate the shares Outperform. When we downgraded shares of Transocean to Market Perform, there was only 10% upside to our target. Our $87 target represents 10 times our 2011 price/earnings estimate.
-- Robert MacKenzie
-- Doug Garber

StevieJ

Depressing article from the Times

http://www.timesonline.co.uk/tol/news/environment/article7134581.ece

Some rationale for price drop in the FT.

http://ftalphaville.ft.com/blog/2010/05/25/241936/47bn-and-counting/

97trophy

The Guardian

"BP faces extra $60bn in legal costs as US loses patience with Gulf clean-up".

The Guardian has obtained a confidential briefing, from a top-level US environmental lawyer who specialises in oil industry litigation, to stockbroker Canaccord, assessing the financial impact of impending legal action on BP.

He warned that, under US law, BP is liable for $1,100 in civil penalties for each spilt barrel of oil and gas, to be paid to the US federal and affected state governments. If BP is found to have acted with gross negligence – and there is no evidence so far that it has – this fine would rise to $4,300 for each barrel.

1echidna

StevieJ wrote: »

Depressing article from the Times

http://www.timesonline.co.uk/tol/news/environment/article7134581.ece

Some rationale for price drop in the FT.

http://ftalphaville.ft.com/blog/2010/05/25/241936/47bn-and-counting/

I must admit that there seem to have been too many instances of clumsiness on BPs part in N. America since they started there. May be a problem between US and British employees. Perhaps this crisis has thrown them together in a way which will improve effectiveness.

97trophy

NY Times........

Reports from a Congressional briefing suggest, as many have speculated, that the mud was removed despite heavy gas output, a warning sign, with BP admitting its workers may have made a “fundamental mistake”

97trophy

From economist Yves Smith at naked capitalism.

IMO a interesting post worth reading in full. It's not just posturing politicians that are strong critics of BP.

But the one that got my attention was the exclusive interview of BP Chairman Carl-Henric Svanberg in the Financial Times, in which he remarked:

The US is a big and important market for BP, and BP is also a big and important company for the US, with its contribution to drilling and oil and gas production. So the position goes both ways.
This is not the first time something has gone wrong in this industry, but the industry has moved on.

Yves here. This is simply stunning. First, the BP chairman essentially puts his company on an equal footing as the United States, implying their relation is not merely reciprocal, but equal. BP doesn’t even approach the importance of Microsoft in its heyday, a-not-very-tamed provider of a near monopoly service. And his posture “this is just one problem like others, no biggie” is an offense to common sense and decency...............


What is worse is the complete lack of any apology or sign of remorse. Even if BP engaged in more or less the same conduct, it would be far more canny for its top officials to make great shows of empathy for all the people who are suffering as a result of the disaster, remind the public that they lost their own men too, and make great speeches about not resting until the leak is plugged, and then add the caveat” “but we have to proceed in a deliberate manner, rushing could make matters worse. We know this is frustrating, and we wish we could hurry the pace.”



The inability to perceive the need to fake remorse shows how wildly out of touch many corporate leaders are with reality.

artha

Anyone know (or know how to find) which UK UT/OEIC funds have a significant exposure to BP?