Posted on 06/01/2010 8:22:31 PM PDT by mlocher
LONDON (Reuters) - BP will seek to patch up its battered share price by reassuring investors the cost of cleaning up the oil spill in the Gulf of Mexico is manageable and will not affect dividends, British media reported on Wednesday.
The oil major's Chief Executive Tony Hayward will tell investors in a call this week the cost of the clean up -- that has so far spiralled to nearly $1 billion -- can be easily absorbed by cash generated from its operations around the world, the Daily Mail said.
BP's failure to stop the oil spill prompted a plunge in the company's share price on Tuesday and the Obama administration said it opened a criminal investigation.
"If our current efforts were to fail and we have to wait for the relief wells to be drilled and had six months of clean-up, we estimate the cost at $3 billion," Hayward told the Daily Mail.
He added this cost must be considered in view of the oil major's "very strong operational performance generally which will result in free cash flows of $7.5 billion to $8 billion," the paper said.
However a source at BP who asked not to be identified said the figure was a rough estimate for ongoing clean up costs, extrapolated from the latest cost update of $990 million, less $40 million for compensation claims, and did not reflect an estimate of total costs.
"No one knows what the total cost is going to be," the source said.
Gordon Gray at Collins Stewart said last week in a research note that clean up costs could be $2 billion this year for BP which carries 65 percent of the total bill as this is its share of the block. Anadarko owns 25 percent and Mitsui 10 percent.
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Life is good for those that sold their BP stock late last week.
If memory serves a law that was passed in response to the 1989 Exxon Valdez spill in Alaska makes BP responsible for cleanup costs. But that law sets a $75 million limit on other kinds of damages.
A drop in the bucket seeing BP’s first quarter profits were somewhere in the neighborhood of $6 billion.
Just curious.
How,...only drill at the sea of tranquility?
Well, one could say if more drilling was allowed on land, this wouldn’t have happened. One could say that.
“If memory serves a law that was passed in response to the 1989 Exxon Valdez spill in Alaska makes BP responsible for cleanup costs. But that law sets a $75 million limit on other kinds of damages.”
I read on CNN that it’s $75 Mil ONLY if the company did nothing wrong, a virtual impossibility since the government will find something.
A British Company, I doubt it.
Right now BP are figuring out how to break-up the company and protect any valuable assets of the company. They are trying to figure out a way to segregate the liability responsible Gulf of Mexico assets, maybe even the U.S. assets as a whole from Azerbijan and their few other profit centers. Prudhoe Bay needs a revitalization and maybe better for somebody else like Exxon or Chevron or Shell.
This event should be about $4bil to the dynamic kill effort (which holds no guarantees) without claims and who knows with the claims. Add to that an ongoing months long clean-up effort and you see a bill of...say $6bil to $10bil.
Hurricane season is here and you will soon see the whole BP fleet fleeing storms much more often than you will see them drilling or anything else useful. Any relief well opportunities will be delayed by the storms, the oil collection vessel will disconnect and oil will once again spew into the Gulf until they can reconnect.
Meanwhile, Exxon, Shell and Chevron are trying to figure out how to make a run on these relatively cheap assets while making measured allowance for the liability. That liability is a tough one and you can bet they have a gaggle of lawyers beavering away on the law on that one. Don’t count ConLips out either... they have a limited future without an acquisition of something.
I think I can see shades Enron over the hill. Couldn’t happen to nicer people. This company needs to go away and not come back.
I have heard both sides on this. It makes me wonder when Congress is proposing a bill right now to raise the limit to $10B. I’m guess that currently, the ‘powers in Washington’ believe liability is limited.
Its called the “Big Oil Bailout Prevention Act” and it would raise the economic damages liability cap for offshore oil spills from $75 million to $10 billion. (Sen. Robert Menendez, Sen. Frank Lautenberg and Sen. Bill Nelson)
[See http://news.firedoglake.com/2010/05/03/new-bill-would-raise-bps-liability-limit-to-10-billion/]]
Neat little title our crafty Dems and Rinos have come up with, huh?
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