rssWill the Spill End BP?
Tuesday, June 01, 2010 at 9:26 am
- 38 Comments
On Saturday, BP announced the failure of “top kill,” its effort to plug the Deepwater Horizon disaster in the Gulf of Mexico. Markets around the world sent BP’s stock south. Over the weekend, the share price fell from £4.95 to £4.12 on the London Stock Exchange, cutting nearly $23 billion in value from the company. And in New York, shares fell 15 percent in premarket trading. Meanwhile, Washington pundits started calling for more aggressive action against BP, with former Labor Secretary Robert Reich, for instance, arguing Obama should put the oil giant’s North American operations into temporary receivership.
It raises the question: Will the Deepwater Horizon disaster force BP out of business?
It depends. First, let us quantify the costs to the company thus far. As of today, BP will have spent $1 billion on the clean-up effort, “including the cost of the spill response, containment, relief well drilling, grants to the Gulf states, claims paid and federal costs.” That includes $40 million paid out on 15,000 economic injury claims.
But, BP grimly notes, “It is too early to quantify other potential costs and liabilities associated with the incident.” What might those add up to? Congress is expected to raise the liability cap to $10 billion. BP owns 65 percent of the Deepwater Horizon site, meaning its liability could be as much as $6.5 billion.
But the liability cap would not cover some other costs, like those from criminal charges, lost revenue, the loss of government contracts or separate liabilities for worker pay-outs. Plus, if the government prosecutes and BP is found negligent, the cap does not apply at all — and today, Attorney General Eric Holder is headed to the Gulf to meet with local federal and state prosecutors.
On top of that is the cost of BP’s lost business. The region accounts for around one-sixth of BP’s production. A one-percent “rise in Gulf of Mexico royalties, a six-month drilling moratorium and a 20 percent increase in drilling and completion costs add up to a hit of $1.95 billion” this year, an analyst tells The Wall Street Journal.
So will BP be able to shoulder those costs? Up to a point. The company made just a bit less than $6 billion last quarter. Annually, it spends around $10 billion on its dividend, which it will likely cancel for this year. If the liability cap applies and BP manages to contain other costs — and if it is not found negligent — the company hypothetically would have enough cash to survive.
And there’s one other major liability that would force BP to close its doors. If the government chose to prosecute BP under the Clean Water Act, it could fine the company $4,300 per barrel leaked into the Gulf — fines independent of the liability cap. If the government won those damages, BP would currently be on the hook for tens of billions — possibly enough to bankrupt the company.**
** I initially calculated the damages as too high, given the amount of oil that has leaked, and have updated the post to clarify. Apologies for the error.
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38 Comments
Pingback posted June 1, 2010 @ 3:13 pm
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Comment posted June 1, 2010 @ 4:40 pm
GOOD! I hope they do go outta business. Of course they will bankrupt and not pay for what they have done – and they'll shout out they had a “moral obligation to the shareholders”. BP's feet needs to held to the fire and forced to pay for everything period! And the federal proposal to increase fuel taxes is just another way the American people will have to pay for BP's mistakes – and that is total crap!
Pingback posted June 1, 2010 @ 6:33 pm
[...] Will the Spill End BP? « The Washington Independent [...]
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[...] Will the Spill End BP? « The Washington Independent [...]
Pingback posted June 1, 2010 @ 8:39 pm
[...] punitive and compensatory actions against BP — and the costs might run the British oil giant out of business. Attorney General Eric Holder this afternoon announced that the government has started to look into [...]
Pingback posted June 1, 2010 @ 9:22 pm
[...] Will the Spill End BP? « The Washington Independent [...]
Comment posted June 1, 2010 @ 8:55 pm
Honestly, who gives a s**t if BP goes under? Since they are (were) producing only one to one and a half percent of domestic usage, and with the Gulf disaster, it cancels out ANY production we would be likely to see, who cares?
The Gulf disaster will be multiple generational. The Gulf will never be the same again. Ramifications will affect the entire nation at a time when we can least afford it. The habitat and wildlife that is and will be destroyed are national treasures. BP is responsible for that. Will they pay EVERY cent they owe?
No.
Will they be able to return the Gulf to it's previous condition?
No.
Let BP serve as an example to corporations around the world that you cannot rape the planet without consequence. As for the idiots who hollered “drill, baby, drill”, where are they now? Even $arah Palin is keeping her trap shut. Why? It never stopped her before. She lives so comfortably with hypocrisy, I would have thought she would have said something stupid by now.
Next, we have Rand Paul wanting to give corporations the freedom to do EXACTLY what BP has done. All the cranks and toilers that slithered out from hiding last year are silent. I would think they would be proud of BP.
I am now virulently anti-bagger. The Republicans? They're too busy shooting themselves in the foot right now, to have an opinion I would think.
Let BP die. Let it serve as impetus to go to renewable energy sources and put Americans back to work. If not, we may end up going the way of the dinosaurs.
And look what happened to what THEY ultimately became.
Comment posted June 1, 2010 @ 9:21 pm
116bn? What calculator are you using?
90 days x 20k bbls per day = 1.8mbbls
1.8m x 4300 = $7.75bn. BP produces 40bn in cash per annum.
Heck…double that to 180 days…that's $16bn in fines.
Maybe you should double check your math before you go around talking about bankrupting companies.
Comment posted June 1, 2010 @ 9:25 pm
“GOOD! I hope they do go outta business”
i guess you ride your bike everywhere; cultivate your own crops; pump your own water; have never flown in a plane and never used a computer attached to a power grid that is fueled by natural gas. get a clue.
Comment posted June 1, 2010 @ 10:05 pm
Obviously my math was wrong — have corrected the post above! Apologies for that. Still, I'd point out that the punitive and compensatory damages could easily bankrupt the company. Will have more on that later. Tx!
Comment posted June 1, 2010 @ 10:26 pm
The only people who should be blamed for this are the American people because they are addicted to oil. Perhaps if you used alternative forms of energy you wouldn't have this problem. Also remember that that if BP goes bankrupt it will damage private pension funds in the UK – including mine! So the U.S government should remember that before taking legal action.
Comment posted June 1, 2010 @ 10:31 pm
I have a clue and I believe there's enough competition out there that would cover the the void BP would make in the market by their exit.
Comment posted June 1, 2010 @ 10:39 pm
Sorry, it's not the American peoples fault, the entire world is reliant on oil. I agree that alternative fuel and cutting oil consumption is mandatory – and that should have happen here in the USA and around world – but no – it goes back to greed. Secondly, I sorry about your pension in the UK, but BP brought Standard Oil (the largest US oil company), so maybe BP should get their heads outta their own asses and should have stressed SAFETY instead of profits. Now they've ruined peoples lives and livelihoods, not mentioning killing off a way of life. And the American people shouldn't be held accountable for BP's greed and pressure tactics.
Pingback posted June 2, 2010 @ 12:01 am
[...] Will the Spill End BP? « The Washington Independent [...]
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[...] Will the Spill End BP? « The Washington Independent [...]
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[...] Will the Spill End BP? « The Washington Independent [...]
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[...] Will the Spill End BP? « The Washington Independent [...]
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[...] Will the Spill End BP? « The Washington Independent [...]
Pingback posted June 2, 2010 @ 1:29 am
[...] Justice department to launch criminal investigation of BP. More here. Could the oil spill end BP? If the government chose to prosecute BP under the Clean Water Act, it could fine the company $4,300 [...]
Pingback posted June 2, 2010 @ 1:45 am
[...] Will the Spill End BP? « The Washington Independent Tags: 1895S, DOLLAR, Morgan, MS63, PCGS, Silver Leave a Reply Click here to cancel reply. [...]
Pingback posted June 2, 2010 @ 2:15 am
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[...] Will the Spill End BP? « The Washington Independent [...]
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[...] Will the Spill End BP? « The Washington Independent [...]
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[...] Will the Spill End BP? « The Washington Independent [...]
Pingback posted June 2, 2010 @ 11:12 am
[...] This post was mentioned on Twitter by Bret Carbone, Greg, John Derry, Breaking Politics, You Post DC and others. You Post DC said: Will the Spill End BP? – The Washington Independent — Tue Jun 01 13:26:38 UTC 2010 On Saturday, BP announced … http://ow.ly/17zJF5 [...]
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Pingback posted June 3, 2010 @ 10:45 pm
[...] Will the Spill End BP? « The Washington Independent [...]
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Comment posted June 8, 2010 @ 5:41 am
LET THE BLAME COME LATER, JUST STOP THE OIL. THIS WAS NEVER DONE ON PURPOSE. PERHAPS OTHER COUNTRIES WITH DEEP WATER SUBS,SHOULD ASK US U.S. IF THEY CAN HELP. THERE ARE 5 COUNTRIES THAT HAVE THE SUBS. ONE IS FRANCE
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Comment posted June 30, 2010 @ 7:25 pm
Don't worry about BP going out of business – I'm sure if BP files for bankruptcy, our liberal socialist U.S. government will be more than happy to bail them out, just like they have done with every other big business who's gotten themselves into trouble over the past year or so.
@John Derry I agree with khank – you say it's the fault of Americans for being “addicted to oil”? I don't know where YOU come from (perhaps some unknown Amish island?), but from where I stand, I see most of the world being pretty proportionately dependent on oil.
BTW, your indication that the majority of your concern is the fate of your pension, in a time of major crisis like this, says a whole lot about your character. You also being a BP employee, you're representing the company well in showing that the concern is money first.
Comment posted August 10, 2010 @ 1:21 am
Because BP is the only major oil company right? Get a clue you ignorant fool.
Comment posted September 6, 2010 @ 2:58 am
The Gulf disaster will be multiple generational. The Gulf will never be the same again. Ramifications will affect the entire nation at a time when we can least afford it. The habitat and wildlife that is and will be destroyed are national treasures. BP is responsible for that. Will they pay EVERY cent they owe?
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