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Despite Accord, Spill Aftermath Shadows BP

November 16, 2012 by Leave a Comment

The agreement, which included 14 guilty pleas and $4.5 billion in fines and other payments to be made over five years, almost certainly removes the possibility of further criminal charges.

But it still leaves BP vulnerable to larger liabilities, particularly fines for spills under the Clean Water Act. Depending on whether BP is found grossly negligent, a term which is open to considerable interpretation by courts, BP could be fined anywhere from $5 billion to $21 billion, or $1,100 to $4,300 per barrel spilled, analysts say. BP took a charge of $3.5 billion in 2010 for potential Clean Water Act claims.

“This is only an interim settlement,” said Stuart Joyner, an analyst at Investec in London. “Until we get the final settlement of civil claims,” he added, the blowout aftermath “is not going away for BP’s management or investors.”

Shares of the company closed at £416.60, or $660, in London on Friday, off from £425.40 on Thursday.

The civil issues are to be decided in a trial in New Orleans scheduled for late February. On Thursday, the U.S. attorney general, Eric H. Holder Jr., said, “We’re looking forward to the trial” in which “we intend to prove that BP was grossly negligent in causing the oil spill.”

During a conference call with analysts on Thursday, a feisty Brian Gilvray, BP’s chief financial officer, said that BP, too, was “comfortable” with a trial in Louisiana and that it had investors’ support. He also said that if found grossly negligent, BP would appeal, which he said would extend the process into 2014 or later.

“The feedback from our investors is that we have the support of our investors to actually fight this case unless we believe we can come up with a fair and reasonable settlement,” Mr. Gilvray said.

On Friday, Bernstein Research estimated the cost of the spill to BP at $41.9 billion to $59.4 billion, depending on the various legal outcomes. That amount comprises all fines and litigation costs, minus settlements BP has received from various parties involved in the incident.

There is also some risk that BP, because it has admitted to a range of felonies and negligence, may be barred from further contracting with the U.S. government. In a statement Thursday, the company said, “Under U.S. law, companies convicted of certain criminal acts can be debarred from contracting for the federal government.”

Mr. Gilvray said during the call that any move to ban BP would prompt it to rethink investing in the United States. The company said Thursday that it had “not been advised of the intention of any federal agency to suspend or debar the company in connection with the plea agreement.”

BP’s U.S. business is of great importance to the company. Its output of oil and natural gas in the country represented 28 percent of its global production, excluding Russia, in the third quarter, and about 20 percent of the profits in its key exploration and production unit.

BP says it has invested $52 billion in the United States over the past five years, more than in any other country, and employs 23,000 Americans.

The company’s North American center in a suburban Houston office park is a major hub of the company, housing the Americas exploration teams and a large computer center for crunching data on the difficult-to-fathom oil fields in the Gulf of Mexico and elsewhere.

The heart of its business is the Gulf of Mexico, where BP, according to the company, holds the most oil leases. BP’s operations in the gulf, which are among its most profitable, are still a long way from coming back from the spill. For instance, production from BP-operated Gulf of Mexico fields is averaging about 150,000 barrels a day of oil equivalent, according to a company spokesman, down about two-thirds from before the spill.

The slump is largely due to the drilling moratorium imposed after the Gulf of Mexico blowout, which prevented the routine maintenance drilling required to support production.

BP said it expected output in the Gulf of Mexico to be flat next year on the so-called core fields it has retained. Thereafter, it expected output to rise steadily.

Article source: http://www.nytimes.com/2012/11/17/business/global/despite-accord-spill-aftermath-shadows-bp.html?partner=rss&emc=rss

Filed Under: Global Business Tagged With: , ,

BP to Get $250 Million in Gulf of Mexico Oil Spill Settlement

December 16, 2011 by Leave a Comment

Cameron, based in Houston, designed and manufactured the so-called blowout preventer on the rig, which failed to stop the oil from spilling. The settlement, which is BP’s fourth so far with companies that worked on some parts of the well, was not an admission of liability by either party, BP said.

The “settlement allows BP and Cameron to put our legal issues behind us and move forward to improve safety in the drilling industry,” Robert W. Dudley, the BP chief executive, said in the statement. “Unfortunately, other companies persist in refusing to accept responsibility for their roles in the accident and for contributing to restoration efforts.”

BP had already agreed to similar settlements with MOEX and Anadarko Petroleum, which had stakes in the well, and Weatherford, which made a part of the well. Those settlements amounted to a total of about $5.1 billion.

Legal fights over claims worth tens of billions of dollars continue with Transocean, which operated the rig, and Halliburton, which was responsible for cement work.

BP plans to use the cash payment from Cameron to help settle individual and government claims and pay for costs related to the oil spill.

The company had set aside about $41 billion to cover all costs related to the oil spill, including a $20 billion compensation fund. It said Friday it had already paid out about $7.5 billion to local businesses and individuals.

BP said Cameron agrees that the explosion was the result of several complex and interlinked issues and not the fault of one single company. BP said it agreed to indemnify Cameron for compensation claims resulting from the accident as part of the settlement.

There was no immediate comment from Cameron.

The explosion of the oil well in the Gulf of Mexico on April 20, 2010, killed 11 workers and resulted in a spill of nearly five million barrels of oil.

BP has continued to invest in exploration in the United States and the gulf, and in October received its first permit from United States regulators since the oil spill to drill a new well in the region.

Article source: http://www.nytimes.com/2011/12/17/business/global/bp-to-get-250-million-in-gulf-of-mexico-oil-spill-settlement.html?partner=rss&emc=rss

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2 From Transocean Decline to Testify in U.S. Inquiry of BP Spill

April 1, 2011 by Leave a Comment

The inquiry, jointly conducted by the Coast Guard and the Bureau of Ocean Energy Management, Regulation and Enforcement, is holding hearings in New Orleans next week on the failure of the subsea blowout preventer to contain the explosive oil and gas that led to the accident, which killed 11 workers and bled nearly five million barrels of oil into the Gulf of Mexico.

Michael R. Bromwich, the director of the ocean energy bureau, called the refusal of the Transocean employees to appear “unacceptable” and called upon the company to urge them to testify and to punish them if they did not.

“In my judgment, this is less a legal issue than one of whether Transocean recognizes its moral and corporate responsibility to cooperate with an investigation into the causal factors of the most significant spill in United States history,” Mr. Bromwich said in a letter on Thursday to Steven L. Newman, the chief executive of Transocean.

Mr. Bromwich also said the company’s compliance with the investigation could affect its future ability to receive permits to operate offshore. The company, a drilling rig owner and operator, does not receive permits directly but operates as a contractor or a subcontractor to the oil company drilling the well. Transocean was the drilling contractor for BP, which held the permit for the well that catastrophically failed last April 20.

A lawyer for the company responded that Transocean had cooperated extensively in the federal investigation and would provide a senior technician to answer questions about the design, maintenance and performance of the blowout preventer. The company said it had no power to force other employees to travel to New Orleans to appear before the body.

Matt Hennessy, the lawyer for James Kent, a Transocean asset manager who has declined to cooperate with the federal investigation, said that the government did not have the authority to compel his client to testify. He also said that the question now before the panel — the maintenance of the oil rig’s blowout preventer — had been rendered irrelevant by a government report issued last month that found that the device functioned as designed but was not strong enough to control the pressure created by the runaway well.

Mr. Hennessy also said that Mr. Bromwich’s suggestion that Transocean punish Mr. Kent or others for not cooperating was out of line.

“It’s just simply outrageous,” he said. “Here we have our government telling a company that it should consider firing employees who are making decisions which are perfectly within an employee’s rights.”

Mike Walsh, a lawyer for another of the employees, Jay Odenwald, said that his client lived outside the enforceable range of an administrative subpoena and thus did not have to appear. He said that Mr. Odenwald had been identified as a potential witness last year along with scores of other employees of the companies involved in the well.

“The board started naming so many persons of interest that things got out of control and I made the decision that he just wasn’t going to be subject to a spectacle they call a hearing,” Mr. Walsh said.

Neither of the two Transocean employees was aboard the Deepwater Horizon drilling rig at the time it exploded, a company spokesman said.

Article source: http://feeds.nytimes.com/click.phdo?i=40740a6b8b12feccc6fae8cf29106318

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