http://www.marketwatch.com/story/bps-market-value-halves-as-spill-costs-loom-large-2010-06-09?dist=afterbell
June 9, 2010, 6:58 p.m. EDT
BP hit by doubts over ability to pay for costs of oil spill
By Steve Gelsi & Alistair Barr, MarketWatch

SAN FRANCISCO (MarketWatch) — BP PLC shares slumped Wednesday, leaving its market value halved in fewer than seven weeks, while the oil giant’s bonds were crushed as questions mounted over whether it can afford to clean up the worst environmental disaster in U.S. history.
Oil-industry insider Matt Simmons, head of the Texas-based, energy-focused investment bank Simmons & Co., told Fortune magazine Wednesday that BP (BP 32.28, +3.08, +10.55%) (UK:BP. 360.10, -31.45, -8.03%) will run out of cash from lawsuits, cleanup costs and other expenses.

“They have about a month before they declare Chapter 11” bankruptcy, Simmons said.

High-resolution video of oil leak

BP releases new video from the busted oil well on the Gulf of Mexico seabed.
“One really smart thing that [President Barack] Obama did was about three weeks ago, he forced BP CEO Tony Hayward to put in writing that BP would pay for every dollar of the cleanup,” he added. “But there isn’t enough money in the world to clean up the Gulf of Mexico. Once BP realizes the extent of this, my guess is that they’ll panic and go into Chapter 11.”

BP’s U.S.-traded shares slumped 16% to close at $29.20 on heavy volume. It’s the lowest level for the stock since 1996. The shares traded above $60 before April 22, the day the Deepwater Horizon drilling platform sank off the coast of Louisiana.
BP’s 2013 bonds, which carry a 5.25% coupon, slumped on Wednesday, pushing the yield above 8%.
BP already has spent more than $1 billion dealing with the spill, and some analysts estimate the disaster could cost up to $40 billion. The company also has said it will pay for all cleanup costs and will cover all “legitimate” claims. Read more about the pressure on BP.

Art Hogan, market strategist for Jefferies & Co., said traders at the firm cited speculation that BP was talking to bankruptcy lawyers as one instigator of the selloff on Wednesday.
“It’s hard to calculate the ultimate cost of the spill,” Hogan commented. “No one even knows how much oil is coming out of the well and there could be more impact from a hurricane. With all the new technology nowadays with remote-controlled robots and video cameras, it’s happening in real time in front of everyone all day long. It’s a torrential disaster.”

BP spokesman John Pack said the company remains on solid financial footing, with 18 billion barrels of proven reserves. “I have no idea where that rumor is coming from,” he replied, when asked if BP was talking to bankruptcy lawyers.

Pack pointed to a statement made last week by BP’s chief executive. “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 barrels of proved reserves and 63 billion barrels of resources. All of this gives us significant flexibility in dealing with the costs of this incident.”
The Deepwater Horizon platform exploded on April 20, killing 11 people. It sank two days afterwards, triggering the worst environmental disaster in American history.

Twelve angry jurors

Gregory Evans, a partner at Milbank Tweed Hadley McCloy LLP who has represented large corporations in environmental suits, said BP may have to pay billions of dollars in an environmental lawsuit.
“The [liability] exposure is very high for BP, because there appear to be statements that would indicate this was potentially more than negligence,” he commented. “As we know from Exxon Valdez and other serious catastrophic mass tort cases for environmental-damage litigation, juries can become very angry with management and express that anger in very high punitive-damages awards.”

‘Juries can become very angry with management and express that anger in very high punitive-damages awards.’
Gregory Evans, Milbank Tweed Hadley McCloy

Still, punitive damages will likely be kept on par with whatever BP pays for compensatory damages, a rule laid down by the U.S. Supreme Court in its decision to reduce damages in the Exxon Valdez (XOM 61.84, +1.81, +3.02%) case, Evans noted. Those damages were awarded after many years of court battles, and also included payments from insurance companies.

Evans said he had no reason to believe that BP would file for bankruptcy in the near future, but even if it did, claims against it would still be paid under a provision called the estimation process. “The estimation process in bankruptcy can be efficient and it can lead to full payment of claims,” he added.

Ahead of BP’s big slide on Wednesday, analysts at Tudor Pickering Holt indicated that talk had been escalating about a bankruptcy, but concluded that BP is worth more to the government and to investors if it keeps operating.
“There is a frenzy for sources/experts/analysts to one-up each other on the assessment of fines and liability and talk about BP as a donut-hole stock (zero),” the Tudor analysts said. “We have a really hard time getting there from a practical perspective, as BP is worth more alive than dead to the U.S. government and all those that want milk from this future cash cow.”

Steve Gelsi is a reporter for MarketWatch in New York.
Alistair Barr is a reporter for MarketWatch in San Francisco.

Special thanks to Richard Charter

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Final Gulf Oil Spill Community Forum-1

http://www.miamiherald.com/2010/06/13/1678474/barbour-moratorium-on-gulf-oil.html

BY EMILY WAGSTER PETTUS
ASSOCIATED PRESS WRITER
JACKSON, Miss. — Mississippi Gov. Haley Barbour said Sunday he’ll tell President Barack Obama that the six-month moratorium on exploratory deepwater drilling in the Gulf of Mexico could hurt the U.S. economy and force oil companies to take their equipment to other countries.

Obama is scheduled to arrive Monday morning in Gulfport, the first stop on a two-day trip to Mississippi, Alabama and Florida. He’ll meet with local officials about how the states are affected by oil that has been spewing into the Gulf since the Deepwater Horizon drilling rig exploded 50 miles south of Louisiana nearly eight weeks ago.

While parts of Louisiana’s shoreline and marshes have been coated with globs of oil, Mississippi’s manmade beaches remain largely untouched except for tar balls. Oil has affected some of Mississippi’s barrier islands near Alabama.

Barbour, a Republican, said he will meet with the Democratic president in Gulfport. Barbour skipped Obama’s three previous appearances at Louisiana sites affected by the oil spill, although governors from other Gulf states met with the president.

Appearing Sunday CBS television’s “Face the Nation,” Barbour repeated what he has said publicly several times the past few weeks – that he doesn’t believe there should be a moratorium on exploratory oil drilling in the Gulf of Mexico.

“There have been more than 30,000 oil wells drilled in the Gulf of Mexico in the last 50 years. This is the first time something like this has ever happened,” Barbour said. “And we need to get to the bottom of it, find out what happened, make sure it doesn’t happen again. But I think it is very reasonable to continue to drill.”

The Deepwater Horizon spill is huge, but not unprecedented in the Gulf. The world’s largest peacetime oil spill happened in 1979, when the Ixtoc disaster off Mexico’s coast spewed 140 million gallons of oil into the Gulf in 10 months. Massive slicks reached beaches in Mexico and Texas.

Barbour said oil companies would move equipment to other countries if there’s even a temporary halt to drilling the in Gulf.

“We produce 30 percent of our oil in the United States in the Gulf of Mexico,” Barbour said. “If you shut that down, and it will have an enormously negative effect on the national economy.”

After the April 20 explosion of the Deepwater Horizon, the Obama administration put a six-month moratorium on exploratory drilling in Gulf waters deeper than 500 feet. That halted work at 33 exploratory rigs already operating. Rigs in shallow waters were allowed to keep operating.

Barbour on Sunday also said “very sensational” media coverage of the BP oil spill has hurt Mississippi tourism. He said some coverage does not make distinctions between what’s happening in Louisiana, which has been hardest hit, and other states.

“And the people of the United States have the impression the whole Gulf of Mexico is ankle-deep in oil, which is simply not the case,” Barbour said. “By God’s grace, we haven’t had any oil yet reach the shore of Mississippi. We’ve had a couple of incursions on our barrier islands, but we have lost the first third of the tourist season.”

Mississippi officials said Friday that some areas south of Pascagoula were closed to commercial and recreational fishing because oil from the spill.

The irregularly shaped area runs from the south shore of Horn Island east to the Alabama state line. Waters between the shore and the islands off Biloxi and Gulfport are not included, but the closure area moves north to near the shore around Pascagoula Bay and then to the Alabama line.

Special thanks to Richard Charter

http://www.nytimes.com/2010/06/13/us/13florida.html
June 12, 2010

By DAMIEN CAVE

KEY LARGO, Fla. — When rigs first started drilling for oil off Louisiana’s coast in the 1940s, Floridians scanned their shoreline, with its resorts and talcum-white beaches, and said, No thanks. Go ahead and drill, they told other Gulf Coast states; we’ll stick with tourism.

Floridians worry that tourists like Jessie Weidner, 10, of Columbus, Ohio, will stop coming.

Now that invisible wall separating Florida from its neighbors has been breached. The spreading BP oil spill has already reached the Panhandle, and if it rides currents to the renowned reefs and fishing holes on both Florida coasts, the Sunshine State could become a vacation destination with the rules of a museum: Look, but don’t touch.

All because other states decided to rely on oil and gas, angry Floridians say; all because, in the water, there are no borders — only currents that can carry catastrophes hundreds of miles.

“There’s nothing we can do,” said Mike McLaughlin, 42, while stretching tanned shark skin on a dock here in the Keys. “We’re just sitting here, waiting for it all to disappear.”
Many Floridians, of course, say they are heartbroken for Louisiana, and they still reserve their most caustic criticism for BP and government regulators.

But with oil continuing to gush from a well off Louisiana, Florida has grown angrier at its oil-friendly neighbors. Gov. Charlie Crist said in an interview last week that “there’s a certain level of frustration” with the fact that Florida gets little if any financial benefit from offshore drilling, even though it shares the environmental risks.

On docks and beaches, many Floridians are less measured, and compare Louisiana to a neighbor with a bonfire that has set their block ablaze.

To some extent, it is a conflict set up by history. Louisiana and Florida may share the Gulf of Mexico, but they are essentially oil opposites.

Ever since World War II, when tar balls washed ashore across the gulf after German U-boats sank Allied oil tankers, Florida officials have held drilling at bay with state laws and lobbying in Washington to protect their state’s bustling tourism industry.

Louisiana, meanwhile, is an oil state through and through that discovered its first commercial deposits in 1901 and started drilling offshore in 1947.

State officials have never looked back, and the resulting divide between the two states is now economic as well as cultural: oil and gas contribute about $65 billion a year to the Louisiana economy, according to the state’s oil and gas association, while in Florida, tourism accounts for about $60 billion.

The difference, Floridians now note, is that a crowded bar in Miami has no impact on New Orleans. Oil spills are a different story.

Sean Snaith, an economist at the University of Central Florida, recently completed astudy showing that Florida’s gulf coast could lose 195,000 jobs and $11 billion this year alone if the spill cuts tourism in half.
With oil drilling — as with Wall Street — “there will be significant rethinking about who benefits and who bears the cost,” Mr. Snaith predicted.
Florida has a lot to lose, even beyond tourism and fishing. Housing has become increasingly concentrated along the state’s 8,436 miles of shoreline. With property values already down by a third in many areas and unemployment around 12 percent, the state could see its economy darkened for a decade by the spill.

Also vulnerable is the third-largest reef system in the world, which sits just offshore in the likely path of the loop current that, according to oceanographers,has already sent small blots of oil around Florida’s tip.

Residents worry about losing not just their livelihood, but also their way of life.

Fishermen motor out every day from docks all over the Keys searching for mahi mahi or lobster when the season opens in August, leaving early in the morning for that blissful moment when the sun rises over an open sea.
Boat-dwellers like Paul Peterson, 57, who piloted his 21-foot sailboat here from Massachusetts nine years ago, can hardly imagine being told that the water is off limits, or that the fish are too toxic to eat.

Mr. Peterson has been fighting Stage 4 lymphoma for years. He wears a gold necklace with a coin pulled from a local shipwreck, and he says the memories of diving — especially a few years back “with a great gal from Colorado” — have kept him going.

“It’s a hard fight,” said Mr. Peterson, referring to his cancer with the dropped r’s of New England. “And this place is so beautiful that it would be a sin. I don’t even want to say it or think about it.”
Many of his neighbors are still angry about how the cable news networks publicized the appearance of tar balls in Key West on May 17, tar balls that were not actually from the spill, leading some experts to surmise that they may have come from a ship.

Indeed, Florida is already learning that perception can define reality. Key Largo hosted a “reef fest” for divers last week, but after an extensive advertising campaign estimated to have reached 1.5 million people, only six divers showed up. Jackie Harder, president of the local chamber of commerce, said she had expected 300.
Charter boat captains and diving instructors are also struggling. In previous years, they would usually have had bookings for much of July by now. But next month is wide open for old-timers like Skip Bradeen, 67, who said he had never seen it this bad in his 40 years of taking amateurs out to land the big one.

What really worries most fishermen and environmental scientists are the long-term consequences if oil is carried around the coast of Florida, with plumes underwater and slicks onshore.

“It’s untold billions of babies of fish and lobsters and crabs,” said Douglas N. Rader, chief ocean scientist for the Environmental Defense Fund, an advocacy group. “A wide array of seafood that is in the surface layers of the sea are transferred through the superhighway of the loop current and are depending on the habitats affected by the oil.”
Gary Sands, a third-generation fisherman who works just past the Pilot House bar here in Key Largo, took a break on a hot morning of hammering together lobster traps to explain exactly what that means.

Sitting a few dozen yards from where Mr. McLaughlin stretched his shark skins, Mr. Sands pointed to a pair of blond teenagers, the sons of a fellow fisherman.
“I’m 68, but these boys, they’ve got 30 years,” he said. “If it doesn’t come back for these boys, what’s going to happen?”
Albert Pflueger, 50, another fisherman, whose family once owned the largest taxidermy company in South Florida, pondered the question. Across the docks sat a boat named What Next. Removing his sunglasses, Mr. Pflueger said he could imagine the Keys emptying out like an abandoned mining town.
“The whole Keys makes its living on the water,” he said. “If there is no water, there is no Keys.”
DuWayne Escobedo contributed reporting from Pensacola, and Gary Fineout from Tallahassee.

Special thanks to Richard Charter

 
http://www.nytimes.com/2010/06/13/opinion/13sun1.html

June 11, 2010
If ever there was a test of President Obama’s vision of government — one that cannot solve all problems, but does what people cannot do for themselves – it is this nerve-racking early summer of 2010, with oil spewing into the Gulf of Mexico and far too many Americans out of work for far too long.
The country is frustrated and apprehensive and still waiting for Mr. Obama to put his vision into action.

The president cannot plug the leak or magically clean up the fouled Gulf of Mexico. But he and his administration need to do a lot more to show they are on top of this mess, and not perpetually behind the curve.

It is well within Mr. Obama’s power to keep his administration and Congressional Democrats focused on what the economy needs: jobs and stimulus. Voters are anxious about the deficit. But the president needs to tell them the truth that without more spending the economy could remain weak for a very long time.
Unless Mr. Obama says it, no other politician will. Just the other day, the House passed an unemployment benefits extension from which Democrats, not Republicans, had stripped vital measures that would have helped lots of Americans, but did not close a tax loophole for billionaires.

Americans need to know that Mr. Obama, whose coolness can seem like detachment, is engaged. This is not a mere question of presentation or stagecraft, although the White House could do better at both. (We cringed when he told the “Today” show that he had spent important time figuring out “whose ass to kick” about the spill. Everyone knew that answer on Day 2.)
Any assessment of the 44th president has to start with the fact that he took office under an extraordinary burden of problems created by President George W. Bush’s ineptness and blind ideology. He has faced a stone wall of Republican opposition. And Mr. Obama has had real successes. He won a stimulus bill that helped avert a depression; he got a historic health care reform through Congress; the bitter memory of Mr. Bush’s presidency is fading around the world.
But a year and a half into this presidency, the contemplative nature that was so appealing in a candidate can seem indecisive in a president. His promise of bipartisanship seems naïve. His inclination to hold back, then ride to the rescue, has sometimes made problems worse.

It certainly should not have taken days for Mr. Obama to get publicly involved in the oil spill, or even longer for his administration to start putting the heat on BP for its inadequate response and failure to inform the public about the size of the spill. (Each day, it seems, brings new revelations about the scope of the disaster.) It took too long for Mr. Obama to say that the Coast Guard and not BP was in charge of operations in the gulf and it’s still not clear that is true.
He should not have hesitated to suspend the expanded oil drilling program and he should have moved a lot faster to begin political and criminal investigations of the spill. If BP was withholding information, failing to cooperate or not providing the ships needed to process the oil now flowing to the surface, he should have told the American people and the world.

These are matters of competence and leadership. This is a time for Mr. Obama to decisively show both.

 Special thanks to Richard Charter.