Day 52 BP Oil Spill: BP Stock Plunges; Presidential Update

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We will resume publication on Tuesday, June 15, 2010.

 

Jun 10: As the Administration ratchets up the pressure on BP to pay claims and recover oil, and Congressional hearings (three more today) on the oil spill continue to dominate Congress, the company's stock price continue to plummet -- now hovering around $30 per share; down from $60 before the Gulf Coast disaster. The company has lost around $80 billion in market value since the Deepwater Horizon accident and is now valued at now around $98 billion. Projections of the ultimate cleanup cost range from a low of $10-15 billion to a high from Goldman Sachs analysts who are now estimating figures around $33 billion. Concerns and discussions are now taking place about possible bankruptcy. Concerns increase yesterday when Department of Interior Secretary Ken Salazar testified before the Senate Energy & Natural Resources (ENR) Committee that the Administration would consider claims for loss of work from energy workers in the Gulf due to the drilling moratorium as legitimate.

    BP issued a release on June 10, saying, "The company is not aware of any reason which justifies this share price movement. BP continues to keep the market updated on the Gulf of Mexico oil spill through regular announcements. The response to this incident is our top priority. BP faces this situation as a strong company. In March, we indicated that the company's cash inflows and outflows were balanced at an oil price of around $60/barrel. This was before the costs of the incident. Under the current trading environment, we are generating significant additional cash flow. In addition, our gearing is currently below the bottom of our targeted range. Our asset base is strong and valuable, with more than 18bn barrels of proved reserves and 63bn barrels of resources as at the end of 2009. All of the above gives us significant capacity and flexibility in dealing with the cost of responding to the incident, the environmental remediation and the payment of legitimate claims." 

    BP reported that for the last 12 hours on June 9 (noon to midnight), approximately 7,890 barrels of oil were collected and 15.4 million cubic feet of natural gas were flared. On June 9th, a total of approximately 15,800 barrels of oil were collected and 31 million cubic feet of natural gas were flared. The total oil collected .since the LMRP Cap containment system was implemented is approximately 73,300 barrels. BP said it expects to increase the recovery of oil in the coming days. The volume of oil captured and gas flared is being updated twice daily on BP's website.

    Preparations for additional planned enhancements to the LMRP containment system continue to progress. The first planned addition will use the hoses and manifold that were deployed for the "top kill" operation to take oil and gas from the failed Deepwater Horizon blow-out preventer (BOP) through a separate riser to the Q4000 vessel on the surface, in addition to the LMRP cap system. This system is intended to increase the overall efficiency of the containment operation by potentially increasing the amount of oil and gas that can be captured from the well and is currently expected to be available for operation in mid-June.

    The second planned addition is intended to provide a more permanent LMRP containment cap system by directing the oil and gas to a new free-floating riser ending approximately 300 feet below sea level. It is then proposed that a flexible hose be attached to a containment vessel. This long-term containment option is designed to permit more effective disconnection and reconnection of the riser to provide the greatest flexibility for operations during a hurricane. It is expected to be implemented in early July. In the meantime, work on the first relief well, which started May 2, continues and has currently reached a depth of 13,978 feet. The second relief well, which started May 16, is at 8,576 feet, and preparing to drill ahead. Both wells are still estimated to take approximately three months to complete from commencement of drilling.

    BP reported that to date, almost 42,000 claims have been submitted and more than 20,000 payments already have been made, totaling over $53 million. BP has received more than 173,000 calls into its help lines. The company says the cost of the response to date is approximately $1.43 billion, including the cost of the spill response, containment, relief well drilling, grants to the Gulf states, claims paid, and Federal costs. This also includes the first $60 million in funds for the Louisiana barrier islands construction project. BP said, "It is too early to quantify other potential costs and liabilities associated with the incident."

    This morning President Obama hosted Congressional leaders from both parties to talk through the months ahead and make sure they are as productive as possible. In comments following the meeting, the President said, the top priorities have to be the BP oil spill and putting people back to work. He said, "Obviously the top of our list was our continued response to the crisis in the Gulf and what's happening with the oil spill. We gave them an update on all the measures that are being taken, the single largest national response in United States history to an environmental disaster. But we had a frank conversation about the fact that the laws that have been in place have not been adequate for a crisis of this magnitude. The Oil Pollution Act was passed at a time when people didn't envision drilling four miles under the sea for oil.

    "And so it's going to be important that, based on facts, based on experts, based on a thorough examination of what went wrong here and where things have gone right, but also where things have gone wrong, that we update the laws to make sure that the people in the Gulf, the fishermen, the hotel owners, families who are dependent for their livelihoods in the Gulf, that they are all made whole and that we are in a much better position to respond to any such crisis in the future. So that was a prominent part of the discussion, and I was pleased to see bipartisan agreement that we have to deal with that in an aggressive, forward-leaning way."

    At the President's direction, National Incident Commander Admiral Thad Allen met with top BP claims officials to assert the administration's oversight of BP's claims process in order to ensure that every legitimate claim is honored and paid in an efficient manner. He expressed the American people's urgent need for additional transparency into BP's claims process, including how the process works, and how quickly claims are being processed for both individuals and businesses impacted by the oil spill. Additional meetings will be held in each of the four impacted states from June 11-13. Allen also reported on the progress of the Flow Rate Technical Group (FRTG). He said he had hoped to have new estimates today (June 10); however, information is still being evaluated and should be available very soon.

    Access yesterday's ENR hearing website for Salazar's testimony and a video (click here). Access a Wall Street Journal article on BP stock prices and related issues (click here). Access a release from BP on its stock price (click here). Access a June 10 update release from BP (click here). Access more information on the President's meeting with Congressional leaders (click here). Access a late June 9, updated from the Unified Command center (click here). Access additional information updates and links to releases and briefings on the Administrations response from the Unified Command website (click here). Access the BP response website for links to visuals more information on the recovery work (click here). Access a full timeline of the Administration-wide response to Gulf crisis (click here).