6/14/10

'BP May Lose U.S. Oil Leases'
http://www.bloomberg.com/apps/news?pid=20601087&si...

Excessive vindication or necessary punishment?

For those of you who managed to take short positions on BP, looks like payday #2 is within reach. Stocks down almost 8% today with no sign of a reversal.

Buy Exon/ Chevron/Conoco? or bearish on the overall sector?

Comments (26)

6/14/10

Also good news for longs.

If the US looks too punitive, the UK may decide to shield BP from its liabilities beyond its US assets.

If Cameron gives the OK, BP would have a $40/share floor. Hope Obama's smart enough to at least pursue this via due process, but if he's not, the company's North Sea, Algerian, Russian, and other global assets would be shielded from the US's sovereign risk.

http://www.jasonbondpicks.com
6/14/10

Typical reactionary bullshit. Three Mile Island effectively killed the US Nuclear program. This is a horrible accident, but lets not screw ourselves over anymore. Let calmer heads prevail. If anything this should be a wake up call that we need to seriously inject some spending into alternate energy.

We want to stimulate the economy right? Why not make the USA the global leader in renewable tech development and research. China is kicking out ass right now. What will investments in alternate energy provide?

- Money to universities in the form of research grants, cheaper college for much needed scientists
- Construction spending, which is a hurting area
- Long term, lasting informational and production advantage
- Energy security ( or at least a little diversity )

This will happen more and more as we have to go offshore deeper and deeper for the life blood of America. I blame every American who refuses to see the hidden cost of oil. This is horrible, but factored in the cost. We piss and moan about the Gulf yet think of the destruction and cost having a military presence in the gulf is.

6/14/10
AnthonyD1982:

Typical reactionary bullshit. Three Mile Island effectively killed the US Nuclear program. This is a horrible accident, but lets not screw ourselves over anymore. Let calmer heads prevail. If anything this should be a wake up call that we need to seriously inject some spending into alternate energy.

We want to stimulate the economy right? Why not make the USA the global leader in renewable tech development and research. China is kicking out ass right now. What will investments in alternate energy provide?

- Money to universities in the form of research grants, cheaper college for much needed scientists
- Construction spending, which is a hurting area
- Long term, lasting informational and production advantage
- Energy security ( or at least a little diversity )

This will happen more and more as we have to go offshore deeper and deeper for the life blood of America. I blame every American who refuses to see the hidden cost of oil. This is horrible, but factored in the cost. We piss and moan about the Gulf yet think of the destruction and cost having a military presence in the gulf is.

Here's hoping something happens to get the alternative energy ball rolling.

6/14/10

If the US looks too punitive, the UK may decide to shield BP from its liabilities beyond its US assets.

Dude, seriously???

If the UK shielded BP, the greenies in Europe would storm Parliament. They'd make Guy Fawkes look like a firecracker vendor.

I don't know if you guys caught the 60 Minutes special on this the other night, but criminal charges are coming. Mark my words.

BP goes to zero.

6/14/10
Edmundo Braverman:

Dude, seriously???

If the UK shielded BP, the greenies in Europe would storm Parliament. They'd make Guy Fawkes look like a firecracker vendor.

I don't know if you guys caught the 60 Minutes special on this the other night, but criminal charges are coming. Mark my words.

BP goes to zero.

Doubtful. Cameron is a conservative. If he doesn't stick up for BP- and millions of British pensions- he's in bigger trouble with voters than the Greenies could ever cause. The US and the UK have stuck up for American and British oil companies in the past- the equivalent here would be Russia confiscating Chevron's Russian assets and then saying it owed an additional $100 Billion from its US assets for a $5 Billion oil spill. All Cameron has to do is quietly say "no."

In the unlikely event that Cameron doesn't come though, BP could always find a more suitable country for shielding its global assets. Maybe China? THAT would be interesting. Either way, I wouldn't want to be long or short BP right now unless I was ready to gain or lose $10/share on politics/diplomacy.

Of course, this is all assuming that Obama and the authoritarians running Washington right now decide to go after BP for more than just the $10 Billion clean-up cost and $20 Billion in economic damage the spill will probably ultimately cause.

But also remember that by doing that the US can screw the Brits back. If they do shelter we can go have a tariff war. The Brits are unlikely to want to really go to the mattresses over this issue. As to pulling their rights there is no due process issue, this is admin law. The contract can be yanked for noncompliance, pollution etc. So they voided on their end first. I wouldn't be surprised if they did get their rights yanked.

The US is a lot less important as a trade partner for Europe and the UK than it was twenty years ago. I would understand concerns about the UK screwing the EU, but the US is an ocean away and the world is moving towards economic multilateralism and isolationism anyways.

Bear in mind that BP's market cap is 10% of the UK GDP. Factor in the loans, counterparty relationships with proprietary trading, and more, and a BP bankruptcy could cause a whole lot more damage than just a big oil company going under.

6/14/10

But also remember that by doing that the US can screw the Brits back. If they do shelter we can go have a tariff war. The Brits are unlikely to want to really go to the mattresses over this issue. As to pulling their rights there is no due process issue, this is admin law. The contract can be yanked for noncompliance, pollution etc. So they voided on their end first. I wouldn't be surprised if they did get their rights yanked.

6/14/10

IHMO Edmundo is right, I don't think England has th political will to shield BP. At the same time, I don't think U.S. politicians are willing to endure the jobs lost in the case of a bankruptcy. You guys thing expropriation is a possibility? It sounds crazy to me.....but crazier things have happened.....

6/14/10
aleph:

IHMO Edmundo is right, I don't think England has th political will to shield BP. At the same time, I don't think U.S. politicians are willing to endure the jobs lost in the case of a bankruptcy. You guys thing expropriation is a possibility? It sounds crazy to me.....but crazier things have happened.....

Politically that would be a double edged sword. Populist, yes. However a lot of people wouldn't stand for the seizure of private assets. My feeling is loss of drilling rights especially all offshore and then lawsuit a la big tobacco, with massive penalties although it'll drag on for 8+ years. Also the job losses would likely be absorbed to a large extent I feel.

http://www.jasonbondpicks.com
6/14/10

In my opinion BP is probably the least culpable in the accident. But since they have by far the largest market cap they are the "bad guys". I mean Transocean was the one running the rig when it exploded....Halliburton built the blowout preventer which failed...BP just owned the oil.

I would bet that the UK shields BP assets because the slide in stock price is destroying the majority of British people's pensions. Unless they nationalize BP and claim sovereign immunity, I don't really see how BP can truly survive (in its current form) without the government assistance. I doubt the stock will go to 0, but around $20-30 looks like a pretty good takeover target to me.

I would be Americans are short minded enough to still buy their energy needs from Exxon (or whoever buys BP). The BP name itself is garbage now though.

Reality hits you hard, bro...

6/14/10
MMBinNC:

In my opinion BP is probably the least culpable in the accident. But since they have by far the largest market cap they are the "bad guys". I mean Transocean was the one running the rig when it exploded....Halliburton built the blowout preventer which failed...BP just owned the oil.

I would bet that the UK shields BP assets because the slide in stock price is destroying the majority of British people's pensions. Unless they nationalize BP and claim sovereign immunity, I don't really see how BP can truly survive (in its current form) without the government assistance. I doubt the stock will go to 0, but around $20-30 looks like a pretty good takeover target to me.

I would be Americans are short minded enough to still buy their energy needs from Exxon (or whoever buys BP). The BP name itself is garbage now though.

That's what I'm thinking. If the Chinese show up and offer $35/share for BP, for example, and then claim sovereign immunity, I would find that HEE-LARIOUS and infuriating at the same time.

At worst, this isn't a bank with concrete liabilities. They're way too abstract. Nothing prevents a sale to, say, China or Abu Dhabi at this point.

6/14/10
IlliniProgrammer:

If the Chinese show up and offer $35/share for BP, for example, and then claim sovereign immunity, I would find that HEE-LARIOUS and infuriating at the same time.

lol Ditto

6/14/10
MMBinNC:

In my opinion BP is probably the least culpable in the accident. But since they have by far the largest market cap they are the "bad guys". I mean Transocean was the one running the rig when it exploded....Halliburton built the blowout preventer which failed...BP just owned the oil.

I would bet that the UK shields BP assets because the slide in stock price is destroying the majority of British people's pensions. Unless they nationalize BP and claim sovereign immunity, I don't really see how BP can truly survive (in its current form) without the government assistance. I doubt the stock will go to 0, but around $20-30 looks like a pretty good takeover target to me.

I would be Americans are short minded enough to still buy their energy needs from Exxon (or whoever buys BP). The BP name itself is garbage now though.

A few points worth mentioning:
BP is at fault because it was the well operator. BP designed the well (poorly) and its exec team on the rig had operational command of the rig. Transocean (RIG) provides the rigs and most of the personnel, but does not have the final say over the key engineering decisions. The industry concensus is that BPs cost control efforts backfired (again). The well used an inferior but less expensive design, and other technical corners were cut in order to speed up the completion. Also, Halliburton was the cement contractor and had nothing to do with the BOP, which was built by Cameron. Another name to look at is Anadarko, who had a minority interest (nonoperating) of 25pc and is getting pummelled by the markets due to its much smaller size and greater credit weaknesses than BP. APC will probably bear a prorAta share of the clean up, but not liability, costs.

Deepwater production will continue in the long run because oil is way too efficient of an energy source to ignore. Not advocating this mind you, just noting.

6/14/10

Anyone interested in energy trading should apply to BP. They will survive and think of how many short sided people are avoiding them. Probably a good opportunity for non targets.

6/14/10

Why has the USA become a menopausal woman, over reacting and going ape shit whenever something happens.

6/14/10
AnthonyD1982:

Why has the USA become a menopausal woman, over reacting and going ape shit whenever something happens.

About the same time we realized that China is gonna be better than us some time very soon.

6/14/10

Well now I flip flop on agreeing/disagreeing with you. China has a lot of problems, but is obviously looking a lot stronger now. The USA needs a new space race, something to unify and propel us. We are chickens without a head right now. This country needs to realize that we cannot continue down this path forever. I dont even think this is something our grand kids will have to deal with. It is going to bite us in the ass in our generation.

6/14/10
AnthonyD1982:

This country needs to realize that we cannot continue down this path forever. I dont even think this is something our grand kids will have to deal with. It is going to bite us in the ass in our generation.

Seems to me the case for moving to Hong Kong or Singapore keeps getting stronger. I'm considering starting a country with Libertarian policies. Any one interested in signing up can PM me..... citizenship starts at 10 mill and first 10 customers get to sign the constitution. I'm serious this is a once in a lifetime opportunity.

6/14/10

I think one of the differences between APC and BP, though, is that BP is not a US company and its global assets aren't tied to the US. APC is on the hook no matter what.

BP's well was awarded a commendation for safety from the MMS just two months before the disaster. If BP was cutting serious corners on the well, why would the MMS award them for safety? Whether or not the rig was managed by BP, RIG was the operator and had final say over issues of safety.

The current situation is ultimately a case of xenophobia run amok. Worst of all, the resolution is probably going to involve a sovereign solution like China or Abu Dhabi because of an overreaction by the public.

Again, I'd be careful shorting this stock. You can do it with puts, but if CNOOC suddenly shows up flush with cash it managed to save after the whole Unocal debacle, don't be angry when I say "I told you so."

6/15/10
IlliniProgrammer:

BP's well was awarded a commendation for safety from the MMS just two months before the disaster. If BP was cutting serious corners on the well, why would the MMS award them for safety?

Uh...you might want to read the Inspector General's recent report on corruption at MMS before holding them up as the gold standard of oil industry oversight:

The report includes employees of MMS taking rides to sporting events on private jets owned by the oil companies, the routine giving of expensive gifts to regulators by oil companies, including hunting and fishing trips. And all of this was at the Lake Charles MMS office -- the one that handles the Gulf of Mexico directly.

http://scienceblogs.com/dispatches/2010/05/ig_repo...

6/15/10
Edmundo Braverman:
IlliniProgrammer:

BP's well was awarded a commendation for safety from the MMS just two months before the disaster. If BP was cutting serious corners on the well, why would the MMS award them for safety?

Uh...you might want to read the Inspector General's recent report on corruption at MMS before holding them up as the gold standard of oil industry oversight:

The report includes employees of MMS taking rides to sporting events on private jets owned by the oil companies, the routine giving of expensive gifts to regulators by oil companies, including hunting and fishing trips. And all of this was at the Lake Charles MMS office -- the one that handles the Gulf of Mexico directly.

http://scienceblogs.com/dispatches/2010/05/ig_repo...

I know. Either way, though, this is politics and whenever the issues about the well's safety comes up, BP just has to bring out the photo of Ken Salazar shaking hands with the BP execs on the well's safety award. Unless the pols can show BP bribed the MMS to get this award, there's a lot of responsibility to spread around for this disaster in the media than just BP. BP's response is that its executives had no more reason to think that there were problems at the well than anyone else- the feds had just given it an award for safety.

Yes, the MMS was corrupt. That doesn't necessarily play into the MMS's decisions on which wells are safer than others, though, or that it's somehow BP's fault that the MMS is corrupt. The irony here is that this happened at one of the wells that was deemed safer than others by the MMS.

6/14/10

"Operator" is a technical term in this business that legally denotes who is in charge. BP was the operator. You don't have to believe me if you don't want to.

The aquistion scenario is a very interesting one that we've been kicking around and haven't reached a consensus. BPs biggest reserve assets are in the North Sea, Alaska, and GOM. Unocal was mostly in Asia when China tried to buy it and we all saw the shitfit that got thrown. Outright acquisition of BP by the Arabs or Chinese is a nonstarter for this reason. That leaves the Western majors, notably Xom and Chevron. Maybe they have the stomach to digest BP but color me pessimistic as long as this legal liability question mark is hanging in the air. The most likely scenario I see is a series of asset sales, with transactions being ring fenced from the Macondo liability. BP America has totaled its brand, so this may make the most sense for the new senior management. Free up cash by offloading the compromised (and mature) US assets and redeploy it to other international projects. An outright acquisition of BP would be very difficult, if only due to the lack of buyers. Interesting stuff to think about, and should generate a lot of advisory opportunities

6/14/10
FunkMonkey:

"Operator" is a technical term in this business that legally denotes who is in charge. BP was the operator. You don't have to believe me if you don't want to.

The aquistion scenario is a very interesting one that we've been kicking around and haven't reached a consensus. BPs biggest reserve assets are in the North Sea, Alaska, and GOM. Unocal was mostly in Asia when China tried to buy it and we all saw the shitfit that got thrown. Outright acquisition of BP by the Arabs or Chinese is a nonstarter for this reason. That leaves the Western majors, notably Xom and Chevron. Maybe they have the stomach to digest BP but color me pessimistic as long as this legal liability question mark is hanging in the air. The most likely scenario I see is a series of asset sales, with transactions being ring fenced from the Macondo liability. BP America has totaled its brand, so this may make the most sense for the new senior management. Free up cash by offloading the compromised (and mature) US assets and redeploy it to other international projects. An outright acquisition of BP would be very difficult, if only due to the lack of buyers. Interesting stuff to think about, and should generate a lot of advisory opportunities

You're leaving off TNK-BP, which contributes about 20% of BP's net oil production and is exclusively in Russia. The sovereign risk deserves a discount for a western firm, but for a country like China- which has a huge number of troops on Russia's border- it might make more sense.

Yes, BP did pick up a lot of US assets from the Amoco merger, but they still make up only a plurality of BP's production.

6/14/10

^ good post funkmonkey

6/14/10

Totally dumb and typical communists looking for any excuse to shut down a corporation.

BP Isn't going anywhere.

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"I do not think there is any other quality so essential to success of any kind as the quality of perseverance. It overcom

6/15/10
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