NGI Archives | NGI All News Access
Spill: Optimism for Latest Fix; BP Executives Contrite
BP plc’s latest attempt to collect some of the oil leaking from its crippled Macondo well in the Gulf of Mexico (GOM) was showing promise Friday morning, but it was too early to say whether the effort will be a success, the company said.
Oil and gas was being received onboard the Discoverer Enterprise following the successful placement of a containment cap on top of the Deepwater Horizon’s failed blowout preventer (BOP). This follows the cutting and removal of the riser pipe from the top of the BOP’s lower marine riser package (LMRP) (see Daily GPI, June 4).
“It is expected to take one or more days for flow rates of oil and gas to stabilize and it is not possible at this stage to estimate how much oil and gas will be captured by this containment system,” the company said. “The containment system’s efficiency, continued operation, and ability to contain the oil and gas cannot be assured.”
Preparations continue for enhancements to the containment system. Also, work continues on the first relief well, which started on May 2, and the second relief well, which started on May 16. Both wells are still estimated to take around three months to complete from commencement of drilling. If one or the other of the relief wells is successful at reaching its target, it is seen as the best chance for permanently sealing the well.
Meanwhile on Friday BP executives sought to reassure investors that the company can pay the billions in costs associated with the worst oil spill in U.S. history, as well as withstand the hit to its image caused by the catastrophe.
Chairman Carl-Henric Svanberg and CEO Tony Hayward told shareholders during a conference call that the company’s response to the spill is their top priority, along with rebuilding trust and confidence in BP and ensuring that such an accident never happens again.
“Everyone at BP is heartbroken by this event, by the loss of life and by the damage to the environment and to the livelihoods of the people of the Gulf Coast. It should not have happened and we are bound and determined to learn every lesson to try and ensure it never happens again.”
The company did not cut its dividend, as some lawmakers have called on it to do until all costs of the tragedy are paid. “We fully understand the importance of our dividend to our shareholders,” Svanberg said. “Future decisions on the quarterly dividend will be made by the board, as they always have been, on the basis of the circumstances at the time. All factors will be considered and the decision taken in the long term interests of the shareholders.”
BP said it has spent more than $1 billion in gross direct costs for the response, clean up and relief wells. “Spending at this rate is expected to continue for some time beyond successful completion of work to stop the flow of oil from the damaged well,” it said. “Any fines and penalties would present additional costs.
“The longer-term costs of environmental remediation, claims and litigation are not predictable at this stage, but they will be sizeable and are likely to be spread over many years.”
In its March presentation to shareholders, prior to the explosion and sinking of drilling rig Deepwater Horizon and the massive spill, BP said its cash inflows and outflows were balanced at an oil price of around $60/bbl. “Under the current trading environment we are generating significant additional cash flow,” Hayward said. “In addition, our gearing is currently below the targeted range, and our asset base is strong and valuable, with more than 18 billion bbl of proved reserves and 63 billion bbl of resources. All of this gives us significant flexibility in dealing with the costs of this incident.”
On Friday Standard & Poor’s Ratings Services (S&P) lowered its long-term corporate credit rating on BP to “AA-” from “AA” and placed both the long- and short-term rating on CreditWatch with negative implications. The short-term corporate credit rating remains “A-1+.”
“The downgrade reflects our opinion on the significant operational challenges that U.K.-headquartered oil major BP continues to face to stem or contain the leak from one of its wells in the Gulf of Mexico,” said S&P credit analyst Simon Redmond. “Our rating action reflects, in particular, our view on the costs to BP in 2010 for capping the well and cleaning up; the level of any longer-term compensation, litigation, or fines; the potential for increased regulation and scrutiny of the offshore industry; and the impact on BP’s reputation and brand. While the scope and consequences of the spill are still uncertain, this event is, in our opinion, not consistent with the scenario we had factored into the previous ‘AA’ rating, hence the downgrade.”
Also on Friday Moody’s Investors Service revised to “negative” from “stable” the outlook on the “Baa3” senior unsecured rating of Anadarko Petroleum Corp. and its guaranteed subsidiaries. Anadarko has a 25% stake in the leaking Macondo well. The ratings agency said it did not know how much of the nearly $1 billion in spill-related costs and future costs would be allocated to Anadarko.
“Moody’s further notes that it remains difficult at this stage to assess the full extent of the costs and business impact of this accident on Anadarko’s financial position and liquidity. The future quality of the company’s credit profile will be in large part dependent on the steps Anadarko’s management is willing, and able, to take to maintain financial flexibility and address its share of liabilities stemming from the disaster,” the ratings agency said.
©Copyright 2010Intelligence Press Inc. All rights reserved. The preceding news reportmay not be republished or redistributed, in whole or in part, in anyform, without prior written consent of Intelligence Press, Inc.
© 2024 Natural Gas Intelligence. All rights reserved.
ISSN © 1532-1231 | ISSN © 2577-9877 |