BP, the news is getting bad

[Andreuccio]

Re: BP, the news is getting bad

Really? Goldman wins again.

I was reading an article on the spill over at oil drum a few days ago. Somebody in the comments quipped that it was really an "operation" and that it would be over when whoever was running it had accomplished whatever their objectives were. I assumed it was a joke, or else somebody with a taste for tin-foil fashion accessories. Hmmm.

[GRG55]

Re: BP, the news is getting bad

Really? Goldman wins again.

...

If Goldman only sold 44% of its total holding of BP it lost bigger than it gained...

[ViC78]

Re: BP, the news is getting bad

RIG is getting taken to the woodshed as well. The other offshore drillers, not so much. Is this because it is going to share in the oil spill liabilities?

GRG - Would appreciate if you have any insight into the potential for RIG to shell out cash in this scenario.

[GRG55]

Re: BP, the news is getting bad

RIG is getting taken to the woodshed as well. The other offshore drillers, not so much. Is this because it is going to share in the oil spill liabilities?

GRG - Would appreciate if you have any insight into the potential for RIG to shell out cash in this scenario.

I am not a lawyer, but would be surprised if there is any significant liability for Transocean unless gross negligence can be proved, but then we are dealing with the USA legal system so ridiculous outcomes cannot be discounted completely. However, it is useful to keep in mind that it is BP that has the deep pockets, not Transocean. RIG is a service company. Any successful lawsuit against it would have to be depending on RIG's liability insurance to make good, because other than the equity in its equipment inventory the company doesn't have much else with which it could make payment.

BP, on the other hand, could go either way. Another Pennzoil - Texaco?

Case Study: Texaco versus Pennzoil
In early 1984, Pennzoil and Getty Oil agreed to the terms of a merger. But
before any formal documents could be signed, Texaco offered Getty Oil a
substantially better price, and Gordon Getty, who controlled most of the Getty shares, reneged on the Pennzoil deal and sold to Texaco.
Naturally, Pennzoil felt as if it had been dealt with unfairly and
immediately filed a lawsuit against Texaco alleging that Texaco had interfered
illegally in the Pennzoil–Getty negotiations. Pennzoil won the case; in late
1985 it was awarded $11.1 billion, the largest judgement ever in the U.S. An
appeals court reduced the judgement by $2 billion, but interest and penalties
drove the total back up to $10.3 billion.

James Kinnear, Texaco’s CEO, had said that Texaco would file for
bankruptcy if Pennzoil obtained court permission to secure the judgement by
filing liens against Texaco’s assets. Furthermore, Kinnear had promised to
fight the case all the way to the Supreme Court if necessary, arguing in part
that Pennzoil had not followed S.E.C. regulations in its negotiations with
Getty.

In April 1987, just before Pennzoil began to file the liens, Texaco offered to
pay Pennzoil $2 billion to settle the entire case. Hugh Liedtke, chairman of
Pennzoil, indicated that his advisors were telling him that a settlement
between $3 billion and $5 billion would be fair.

Liedtke turned down Texaco’s offer of $2 billion, and within days — and only
one day before Pennzoil began to file liens on Texaco’s assets — Texaco filed for protection from creditors under Chapter 11 of the U.S. bankruptcy code, as it had promised to do. Later in 1987 Pennzoil submitted a financial
reorganisation plan on Texaco’s behalf, under which Pennzoil would have
received approximately $4.1 billion. Finally, just before Christmas, 1987, the
two companies agreed on a $3-billion settlement as part of Texaco’s financial
reorganisation.

Or does the outcome hinge on the fact that drilling for oil and gas is a risky, dangerous business and wiping out a company the size of BP means nobody else will take the risks of total corporate bankrupcy by drilling high risk wells in USA territory?

Gonna be interesting to see how this turns out, but I am leaning towards the latter outcome. Lots of useless litigation, years tied up in the courts, nobody gets rich except the lawyers...

[ViC78]

Re: BP, the news is getting bad

RIG is a service company. Any successful lawsuit against it would have to be depending on RIG's liability insurance to make good, because other than the equity in its equipment inventory the company doesn't have much else with which it could make payment.

Or does the outcome hinge on the fact that drilling for oil and gas is a risky, dangerous business and wiping out a company the size of BP means nobody else will take the risks of total corporate bankrupcy by drilling high risk wells in USA territory?

Gonna be interesting to see how this turns out, but I am leaning towards the latter outcome. Lots of useless litigation, years tied up in the courts, nobody gets rich except the lawyers...

Thanks for the reply, GRG. IIRC, on the Exxon-Valdez issue, Exxon went through multiple stages of appeals and finally knocked the fine down from ~ $5B to some $500 million, ultimately ruled by the supreme court.

[hayekvindicated]

Re: BP, the news is getting bad

I am not a lawyer, but would be surprised if there is any significant liability for Transocean unless gross negligence can be proved, but then we are dealing with the USA legal system so ridiculous outcomes cannot be discounted completely. However, it is useful to keep in mind that it is BP that has the deep pockets, not Transocean. RIG is a service company. Any successful lawsuit against it would have to be depending on RIG's liability insurance to make good, because other than the equity in its equipment inventory the company doesn't have much else with which it could make payment.

BP, on the other hand, could go either way. Another Pennzoil - Texaco?

Case Study: Texaco versus Pennzoil
In early 1984, Pennzoil and Getty Oil agreed to the terms of a merger. But
before any formal documents could be signed, Texaco offered Getty Oil a
substantially better price, and Gordon Getty, who controlled most of the Getty shares, reneged on the Pennzoil deal and sold to Texaco.
Naturally, Pennzoil felt as if it had been dealt with unfairly and
immediately filed a lawsuit against Texaco alleging that Texaco had interfered
illegally in the Pennzoil–Getty negotiations. Pennzoil won the case; in late
1985 it was awarded $11.1 billion, the largest judgement ever in the U.S. An
appeals court reduced the judgement by $2 billion, but interest and penalties
drove the total back up to $10.3 billion.

James Kinnear, Texaco’s CEO, had said that Texaco would file for
bankruptcy if Pennzoil obtained court permission to secure the judgement by
filing liens against Texaco’s assets. Furthermore, Kinnear had promised to
fight the case all the way to the Supreme Court if necessary, arguing in part
that Pennzoil had not followed S.E.C. regulations in its negotiations with
Getty.

In April 1987, just before Pennzoil began to file the liens, Texaco offered to
pay Pennzoil $2 billion to settle the entire case. Hugh Liedtke, chairman of
Pennzoil, indicated that his advisors were telling him that a settlement
between $3 billion and $5 billion would be fair.

Liedtke turned down Texaco’s offer of $2 billion, and within days — and only
one day before Pennzoil began to file liens on Texaco’s assets — Texaco filed for protection from creditors under Chapter 11 of the U.S. bankruptcy code, as it had promised to do. Later in 1987 Pennzoil submitted a financial
reorganisation plan on Texaco’s behalf, under which Pennzoil would have
received approximately $4.1 billion. Finally, just before Christmas, 1987, the
two companies agreed on a $3-billion settlement as part of Texaco’s financial
reorganisation.

Or does the outcome hinge on the fact that drilling for oil and gas is a risky, dangerous business and wiping out a company the size of BP means nobody else will take the risks of total corporate bankrupcy by drilling high risk wells in USA territory?

Gonna be interesting to see how this turns out, but I am leaning towards the latter outcome. Lots of useless litigation, years tied up in the courts, nobody gets rich except the lawyers...

The hypocrisy of the public never ceases to amaze me. Right now everyone is screaming bloody murder at BP. But when the price of oil hits $200 which it could easily do if there was a total ban on offshore drilling in the US, no one will talk about Deepwater Horizon. Obama will be on TV demanding that "Big Oil" reduce the price to $60 a barrel.

The public wants $1 gas and no oil spills. That's what I call la-la land.

Thanks for the reply, GRG. IIRC, on the Exxon-Valdez issue, Exxon went through multiple stages of appeals and finally knocked the fine down from ~ $5B to some $500 million, ultimately ruled by the supreme court.

I would like to know what kind of insurance cover BP has. I will be amazed if BP ends up footing the entire bill for this. Third Party insurance cover well in excess of $1 billion is common even amongst medium sized commodity traders. No sensible commodity trader/producer would operate on any scale in the market without adequate insurance cover.

I would guess (I have no information on this but Im guessing) that a massive oil company like BP probably has insurance cover up to $20 Billion per "incident" in the aggregate (I will be amazed if it was any less than that). If this is so (and there are good reasons to believe that it is), then it is not the stock of BP which should be getting hammered but those of its insurers. Interestingly enough, no one in the market has talked about insurance liability so far.

It will be a ridiculous irony if the primary insurer turns out to be AIG.

[flintlock]

Re: BP, the news is getting bad

Anyone buying BP yet? This quote makes a lot of sense.

Or does the outcome hinge on the fact that drilling for oil and gas is a risky, dangerous business and wiping out a company the size of BP means nobody else will take the risks of total corporate bankrupcy by drilling high risk wells in USA territory?

Can we really afford to bankrupt BP and ultimately raise the cost of oil?

I would guess (I have no information on this but Im guessing) that a massive oil company like BP probably has insurance cover up to $20 Billion per "incident" in the aggregate (I will be amazed if it was any less than that). If this is so (and there are good reasons to believe that it is), then it is not the stock of BP which should be getting hammered but those of its insurers. Interestingly enough, no one in the market has talked about insurance liability so far.

I'd love to find out more about BP's insurance coverage on this.

Just saw this story

http://www.reuters.com/article/idUSLDE6582NC20100609

[don]

Re: BP, the news is getting bad

It will be a ridiculous irony if the primary insurer turns out to be AIG.

In the post 9/11 world, there is no irony. Only certainty.

[tmicou]

Re: BP, the news is getting bad

Anyone buying BP yet? This quote makes a lot of sense.

Can we really afford to bankrupt BP and ultimately raise the cost of oil?

I'd love to find out more about BP's insurance coverage on this.

You're out of luck on that one, BP self-insures through it's own insurance company, Jupiter. See more at: http://ifawebnews.com/2010/05/03/rep...-spill-for-bp/

[flintlock]

Re: BP, the news is getting bad

You're out of luck on that one, BP self-insures through it's own insurance company, Jupiter. See more at: http://ifawebnews.com/2010/05/03/rep...-spill-for-bp/

Thanks for the info. This is why I visit Itulip.

[touchring]

Re: BP, the news is getting bad

Anyone buying BP yet? This quote makes a lot of sense.

Can we really afford to bankrupt BP and ultimately raise the cost of oil?

http://www.reuters.com/article/idUSLDE6582NC20100609

I'm afraid it will be worst than that, China will probably buy over BP, and like rare metals, the resources outside of the USA will be exclusive for China's use. It is not as if it hasn't happened, China has been buying oil and oil related companies at a very high premiums in the recent 2 years, often delisting them from the stock exchange and running them as private companies.

[LargoWinch]

Re: BP, the news is getting bad

I know nothing about oil spills, can this be possible on a large scale?

[hayekvindicated]

Re: BP, the news is getting bad

You're out of luck on that one, BP self-insures through it's own insurance company, Jupiter. See more at: http://ifawebnews.com/2010/05/03/rep...-spill-for-bp/

Regardless of what happens with BP ultimately, this is going to significantly raise the price of oil in the future. Life is difficult enough as it is for Western oil companies that no longer have access to 90 percent of the world's oil (most of which is now under the control of state owned oil companies).

You will probably find that the supermajors will start getting insurance on their existing insallations, if they don't have this already. And the insurance companies will jack up premiums in light of what has happened.

This increased cost is going to be reflected at the pump.

I'm afraid it will be worst than that, China will probably buy over BP, and like rare metals, the resources outside of the USA will be exclusive for China's use. It is not as if it hasn't happened, China has been buying oil and oil related companies at a very high premiums in the recent 2 years, often delisting them from the stock exchange and running them as private companies.

If the US Government ends up with a claim large enough to bankrupt BP, it may end up with a superior claim over all other creditors of BP. If that is so, it may have a final say on who the assets are sold off to. The may try and hive off the assets to the remaining supermajors. The Chinese may find that they are out of luck - again.

[Sharky]

Re: BP, the news is getting bad

If things get really bad for BP (or maybe only moderately bad), I'm sure the socialist UK government would happily nationalize them, and probably void all claims for damages in the process. Failed bank, failed oil company -- what's the difference to a politician?

[tacito]

Re: BP, the news is getting bad

You can put up all the solar panels you want to, but in the end, you will have almost zero-power.

You need to learn the mathematics and the significance of the number zero because the Sun puts-out almost zero useable photo-electric energy here on Earth. "Zero times anything is still" ZERO..... Got it? That is God's Law, not mine.

If only geographers like myself were planning the energy policy for this world, we wouldn't be in this Great Recession now.... Got it?

2 CALORIES PER SQ. CENTIMETRE PER MINUTE AT NOON IN SUMMER at the surface of the Earth on a clear and dry day is virtually ZERO..... Got it?

The U.S. Dept. of Energy under Dr. Chow doesn't seem to understand it. The Democrats don't seem to understand it. Obama doesn't seem to understand it. The NDP here in British Columbia doesn't seem to understand it. Gordon Campbell, the Premier of BC, doesn't seem to understand it. The pot-heads here in Victoria, BC don't get it. Advanced Micro-Devices (AMD) in Santa Clara, Cal. doesn't seem to understand it (the Law of Zero) either.

We had better embrace and support BP's drilling efforts because without atomic energy, there is no viable near-term alternative energy for the Western World, including Canada and Europe.

Bad maths. Almost zero is way way more than a trillion times zero.