03-05-2010, 06:48 PM
Relax, people....; the damage to the company and the industry may be averted.
BP May Manage Damage to Company From Spill, CEO Says (Update2)
May 03, 2010, 12:52 PM EDT
(Adds estimated costs beginning in 14th paragraph. See {EXT4 <GO>} for more on the Gulf of Mexico oil spill.)
By Stanley Reed
May 3 (Bloomberg) -- BP Plc, the owner of the ruptured well spewing thousands of barrels a day of crude into the Gulf of Mexico, may be able to manage the damage to the company and the industry, Chief Executive Officer Tony Hayward said.
“It all depends on how successful we are with our response,” Hayward said in an interview in Houma, Louisiana, yesterday, when asked how bad the fallout will be. “If we deal with the situation in a way that minimizes the environmental impact, it will cause some debate. If the environmental impact is serious, as a consequence there won’t be much if any extension of offshore drilling.”
The oil spill caused by the explosion and sinking of the Deepwater Horizon drilling rig last month threatens what President Barack Obama said yesterday may become “an unprecedented environmental disaster.” The April 20 accident, which killed 11 people, came at a time when Hayward appeared well on the way to turning BP around by improving the company’s safety record and profitability.
The U.S. Coast Guard has said it is impossible to estimate how much oil is gushing from the well from at least three locations 5,000 feet (1.5 kilometers) below the surface. Obama viewed the Gulf coastline and got an hour-long briefing yesterday on how the slick is fast approaching the Louisiana coastline.
Winston Churchill
Hayward, 52, who said his recent schedule has left him feeling tired, repeated a phrase he says is from Winston Churchill. “When you are going through hell, keep going,” Hayward said over a fish and pasta dinner at a restaurant in Houma, near where BP has its main base for fighting the spill.
Hayward has improved BP’s safety record after a series of accidents including the deadly March 2005 Texas City refinery explosion that helped bring down his predecessor, John Browne, whom he succeeded three years ago. Hayward also brought delayed projects such as Thunder Horse in the Gulf online.
As an indication of improved performance, BP said April 27 net income more than doubled in the first quarter to $6.08 billion from $2.56 billion a year earlier. Earnings excluding gains or losses from holding inventories and one-time items beat analyst estimates.
BP fell 10 percent in London trading last week, the biggest weekly drop since October 2008, reflecting investor concern that the costs of containing the spill will escalate. The shares closed at 575.5 pence on April 30. Crude oil for June delivery rose 84 cents to $$86.99 a barrel at 12:23 p.m. today on the New York Mercantile Exchange.
Thunder Horse, Atlantis
BP has pushed ahead with exploration in the Gulf of Mexico when other companies backed off. Its discoveries include last year’s Tiber find in the Gulf, which may have 4 to 6 billion barrels of oil in place. The 35,000-foot well, the deepest yet, was drilled by the Transocean Ltd.-owned Deepwater Horizon.
BP now produces about 450,000 barrels a day of oil equivalent in the Gulf of Mexico, about 12 percent of its total. Oil from such sites as Thunder Horse, the second-largest producing field in the U.S., and Atlantis, is among the most profitable in BP’s portfolio.
These advances have also boosted U.S. energy production. For the first time in years, the nation’s oil output is rising, with the deep-water Gulf of Mexico contributing about 1.2 million barrels a day of new production. The U.S. produced 5.48 million barrels of oil a day in 2009, the most since 2003, American Petroleum Institute data show.
Angola, Brazil
BP’s offshore operations include Angola, and in March it acquired Brazilian deepwater assets from Devon Energy Corp. in a $7 billion deal.
The National Oceanic and Atmospheric Administration estimates the well is spewing 5,000 barrels of oil a day. At that rate, the volume of the spill would exceed Alaska’s 1989 Exxon Valdez accident by the third week of June.
BP’s cost for the spill may reach $8 billion should the leak continue at that rate for the two or three months it may take to drill a relief well, Neil McMahon, a London-based analyst for Sanford C. Bernstein & Co. wrote in an April 30 note to clients.
“The cost for BP will be heavily influenced by how much oil reaches the Gulf Coast,” McMahon wrote. Louisiana’s $2.5 billion fishing industry and $3 billion in tourism revenue on Florida’s Gulf Coast are at risk from oil pollution, he wrote.
‘Apollo 13 Exercise’
Hayward is betting on a multi-phased approach to stop the spill and limit environmental damage. BP technicians are still trying to tweak the blowout preventer that failed in the initial phases of the Deepwater Horizon accident.
They are working on valves and injecting hydraulic fluid 5,000 feet below the sea surface in what Hayward said is like an “Apollo 13 exercise.”
BP is also preparing to place a cofferdam over the damaged well so as to funnel oil to the surface to a separator vessel. That operation could start within a week. BP is also preparing to sink two relief wells into the reservoir. Once those are completed, heavy drilling mud will be injected into the reservoir to kill the stricken well and eventually cement it up.
BP has assembled a flotilla of 100 ships to skim off oil and lay booms. It has an air force of six planes spraying dispersants. BP is also signing up fishing boats for the effort -- 700 so far -- and training thousands of volunteers on what to do in case oil hits the beaches. BP has arranged for Wal-Mart Stores Inc. to supply them with gloves and tools.
Heavy winds and high seas have hampered BP’s efforts so far, making containment operations difficult. Hayward says the whole effort is costing about $7 million a day.
Detergent Method
BP is experimenting with injecting dispersal fluid at the point of the leak, a method Hayward thinks shows great promise. So far, the detergent-like fluid, which mixes with the released oil and gas and creates a washing-machine effect, seems to be working well, Hayward said. No oil seemed to reach the surface yesterday.
Hayward plans to maintain his presence in the U.S., returning to London only when necessary, such as to visit his wife last week after an operation. In Houma, he stays at a Ramada Inn, along with many of the people working for BP on the spill.
Noting that he has spent his first three years as CEO restoring BP’s fortunes, he said: “My task for the next three years is to put this event behind us.”
--With assistance from Jim Polson in New York. Editors: Kim Jordan, Tina Davis.
To contact the reporter on this story: Stanley Reed in London at sreed13@bloomberg.net
To contact the editor responsible for this story: Will Kennedy at wkennedy3@bloomberg.net
http://www.businessweek.com/news/2010-05...ate2-.html
BP May Manage Damage to Company From Spill, CEO Says (Update2)
May 03, 2010, 12:52 PM EDT
(Adds estimated costs beginning in 14th paragraph. See {EXT4 <GO>} for more on the Gulf of Mexico oil spill.)
By Stanley Reed
May 3 (Bloomberg) -- BP Plc, the owner of the ruptured well spewing thousands of barrels a day of crude into the Gulf of Mexico, may be able to manage the damage to the company and the industry, Chief Executive Officer Tony Hayward said.
“It all depends on how successful we are with our response,” Hayward said in an interview in Houma, Louisiana, yesterday, when asked how bad the fallout will be. “If we deal with the situation in a way that minimizes the environmental impact, it will cause some debate. If the environmental impact is serious, as a consequence there won’t be much if any extension of offshore drilling.”
The oil spill caused by the explosion and sinking of the Deepwater Horizon drilling rig last month threatens what President Barack Obama said yesterday may become “an unprecedented environmental disaster.” The April 20 accident, which killed 11 people, came at a time when Hayward appeared well on the way to turning BP around by improving the company’s safety record and profitability.
The U.S. Coast Guard has said it is impossible to estimate how much oil is gushing from the well from at least three locations 5,000 feet (1.5 kilometers) below the surface. Obama viewed the Gulf coastline and got an hour-long briefing yesterday on how the slick is fast approaching the Louisiana coastline.
Winston Churchill
Hayward, 52, who said his recent schedule has left him feeling tired, repeated a phrase he says is from Winston Churchill. “When you are going through hell, keep going,” Hayward said over a fish and pasta dinner at a restaurant in Houma, near where BP has its main base for fighting the spill.
Hayward has improved BP’s safety record after a series of accidents including the deadly March 2005 Texas City refinery explosion that helped bring down his predecessor, John Browne, whom he succeeded three years ago. Hayward also brought delayed projects such as Thunder Horse in the Gulf online.
As an indication of improved performance, BP said April 27 net income more than doubled in the first quarter to $6.08 billion from $2.56 billion a year earlier. Earnings excluding gains or losses from holding inventories and one-time items beat analyst estimates.
BP fell 10 percent in London trading last week, the biggest weekly drop since October 2008, reflecting investor concern that the costs of containing the spill will escalate. The shares closed at 575.5 pence on April 30. Crude oil for June delivery rose 84 cents to $$86.99 a barrel at 12:23 p.m. today on the New York Mercantile Exchange.
Thunder Horse, Atlantis
BP has pushed ahead with exploration in the Gulf of Mexico when other companies backed off. Its discoveries include last year’s Tiber find in the Gulf, which may have 4 to 6 billion barrels of oil in place. The 35,000-foot well, the deepest yet, was drilled by the Transocean Ltd.-owned Deepwater Horizon.
BP now produces about 450,000 barrels a day of oil equivalent in the Gulf of Mexico, about 12 percent of its total. Oil from such sites as Thunder Horse, the second-largest producing field in the U.S., and Atlantis, is among the most profitable in BP’s portfolio.
These advances have also boosted U.S. energy production. For the first time in years, the nation’s oil output is rising, with the deep-water Gulf of Mexico contributing about 1.2 million barrels a day of new production. The U.S. produced 5.48 million barrels of oil a day in 2009, the most since 2003, American Petroleum Institute data show.
Angola, Brazil
BP’s offshore operations include Angola, and in March it acquired Brazilian deepwater assets from Devon Energy Corp. in a $7 billion deal.
The National Oceanic and Atmospheric Administration estimates the well is spewing 5,000 barrels of oil a day. At that rate, the volume of the spill would exceed Alaska’s 1989 Exxon Valdez accident by the third week of June.
BP’s cost for the spill may reach $8 billion should the leak continue at that rate for the two or three months it may take to drill a relief well, Neil McMahon, a London-based analyst for Sanford C. Bernstein & Co. wrote in an April 30 note to clients.
“The cost for BP will be heavily influenced by how much oil reaches the Gulf Coast,” McMahon wrote. Louisiana’s $2.5 billion fishing industry and $3 billion in tourism revenue on Florida’s Gulf Coast are at risk from oil pollution, he wrote.
‘Apollo 13 Exercise’
Hayward is betting on a multi-phased approach to stop the spill and limit environmental damage. BP technicians are still trying to tweak the blowout preventer that failed in the initial phases of the Deepwater Horizon accident.
They are working on valves and injecting hydraulic fluid 5,000 feet below the sea surface in what Hayward said is like an “Apollo 13 exercise.”
BP is also preparing to place a cofferdam over the damaged well so as to funnel oil to the surface to a separator vessel. That operation could start within a week. BP is also preparing to sink two relief wells into the reservoir. Once those are completed, heavy drilling mud will be injected into the reservoir to kill the stricken well and eventually cement it up.
BP has assembled a flotilla of 100 ships to skim off oil and lay booms. It has an air force of six planes spraying dispersants. BP is also signing up fishing boats for the effort -- 700 so far -- and training thousands of volunteers on what to do in case oil hits the beaches. BP has arranged for Wal-Mart Stores Inc. to supply them with gloves and tools.
Heavy winds and high seas have hampered BP’s efforts so far, making containment operations difficult. Hayward says the whole effort is costing about $7 million a day.
Detergent Method
BP is experimenting with injecting dispersal fluid at the point of the leak, a method Hayward thinks shows great promise. So far, the detergent-like fluid, which mixes with the released oil and gas and creates a washing-machine effect, seems to be working well, Hayward said. No oil seemed to reach the surface yesterday.
Hayward plans to maintain his presence in the U.S., returning to London only when necessary, such as to visit his wife last week after an operation. In Houma, he stays at a Ramada Inn, along with many of the people working for BP on the spill.
Noting that he has spent his first three years as CEO restoring BP’s fortunes, he said: “My task for the next three years is to put this event behind us.”
--With assistance from Jim Polson in New York. Editors: Kim Jordan, Tina Davis.
To contact the reporter on this story: Stanley Reed in London at sreed13@bloomberg.net
To contact the editor responsible for this story: Will Kennedy at wkennedy3@bloomberg.net
http://www.businessweek.com/news/2010-05...ate2-.html
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