BBC NEWS

The chief executives of five major US oil firms are giving evidence

The major oil companies drilling off the US coastline are as unprepared as BP for a major spill, the chairman of a Congressional panel has said.

Exxon-Mobil, Chevron, ConocoPhillips and Shell all have identical response plans to BP, Henry Waxman told the House energy and commerce committee.

BP’s US chief Lamar McKay is to give evidence over the Gulf disaster amid damning accusations BP took shortcuts.

He and other oil bosses will testify about deepwater drilling safety.

Congressmen have suggested in a letter to BP that the company took decisions which raised the risk of a disaster.

US President Barack Obama is due later to make a prime-time TV address to the nation to outline the next steps his administration will take on the spill.

The president has been touring Gulf states affected by the leak, which he has likened to the 9/11 attacks in terms of its impact on future US policies.

Oil has been spewing into the Gulf of Mexico since a drilling rig leased by BP exploded on 20 April with the loss of 11 lives and sank two days later.

The US Coast Guard estimates that about 35,000 barrels of oil are gushing out each day.

A cap placed by BP on the damaged oil well earlier this month is now said to be collecting about 15,000 barrels daily.

Fitch Ratings, one of the three big credit rating agencies, has downgraded BP by six notches, from AA to BBB.

The move means Fitch is less confident of BP’s ability to repay its debts following the huge clean-up and legal costs the company is expected to rack up as a result of the spill.

‘Nightmare well’

Mr McKay is attending the hearing of the House of Representatives committee on energy and environment, along with senior officials from other oil companies. His previous appearance alongside non-oil executives angered President Obama, who called it a “ridiculous spectacle”.

Opening the hearing, committee chairman Henry Waxman took a tough line, declaring that the major oil firms were “no better prepared to deal with a major oil spill than BP”.

He called the firms’ response “cookie-cutter” plans and “paper exercises”, adding: “BP failed miserably when faced with a real leak and one has to wonder whether… [the others] would do any better.”

Echoing the words of former President George W Bush, Mr Waxman said the US was “addicted to oil”.

“This addiction is fouling our beaches, polluting our atmosphere and undermining our national security,” said Mr Waxman.

While the theme of Tuesday’s hearing is deepwater drilling in general, BP chief executive Tony Hayward will face a separate House hearing on Thursday devoted to the Deepwater Horizon disaster.

Mr Waxman and fellow committee member Bart Stupak sent Mr Hayward a letter on Sunday in which they set out technical questions they expect him to answer.

The letter quotes internal communications between BP engineers before the disaster in which the site is described as a “nightmare well”.

‘Carelessness and complacency’

At issue were the choice for the design of the well, preparations for and tests of the cement job, and assurances that the well was properly sealed on the top.

Among other things, BP apparently rejected advice of a sub-contractor, Halliburton, in preparing for a cementing job to close up the well.

BP rejected Halliburton’s recommendation to use 21 centralisers to make sure the casing ran down the centre of the well bore. Instead, BP used six.

In an e-mail on 16 April, a BP official involved in the decisions explained: “It will take 10 hours to install them. I do not like this.”

Later on the same day, another official recognised the risks of proceeding with insufficient centralisers but added: “Who cares, it’s done, end of story, will probably be fine.”

“It appears that BP repeatedly chose risky procedures in order to reduce costs and save time and made minimal efforts to contain the added risk,” the congressmen write.

“If this is what happened, BP’s carelessness and complacency have inflicted a heavy toll on the Gulf, its inhabitants, and the workers on the rig,” they say.

President Obama has spent two days touring three states affected by the spill, which is threatening wildlife, fisheries and the tourist industry.

He will announce new steps to restore the Gulf Coast ecosystem in his TV address, according to a senior administration official who spoke to the Associated Press news agency on condition of anonymity.

The speech will be delivered from the Oval Office, a setting reserved for the most sombre and important moments in US national life.

BBC NEWS ARTICLE

June 15 (Bloomberg) — Exxon Mobil Corp., ConocoPhillips, Chevron Corp. and Royal Dutch Shell Plc executives told Congress deepwater oil wells can be drilled safely after a BP Plc well blew out, as lawmakers criticized their disaster plans as inadequate “carbon copies.”

BBC NEWS

By Brian Swint and John Glover

June 15 (Bloomberg) — BP Plc’s credit rating was cut to two levels above “junk” by Fitch Ratings on concern over the potential cost of cleaning up the Gulf of Mexico oil spill and meeting future liabilities.

BP’s long-term issuer default and senior unsecured ratings were lowered six levels to BBB from AA, Fitch said in a statement today. That follows a reduction from AA+ on June 3.

President Barack Obama and U.S. lawmakers said this week that BP should suspend dividends and set aside funds now for legal claims against the company from the spill, the worst in U.S. history. Fitch said it would be “surprised” if BP didn’t suspend the quarterly payout until the full costs are known. The cost of cleanup and liabilities may reach $40 billion, Standard Chartered Plc. estimated last week.

“The recent claims by U.S. state and federal authorities that BP escrow significant sums preemptively, ahead of any agreed claims process, represent a material change in approach,” Fitch said in a statement.

BP pared gains in London trading after the downgrade. The shares were up 0.7 percent at 358 pence as of 12:10 p.m., after earlier rising as much as 2 percent.

Yield Premium

The yield premium investors demand to hold BP’s 750 million euros of 4.25 percent bonds due next year rather than similar- maturity government debt increased 143 basis points to 505 basis points, according to HSBC Holdings Plc prices on Bloomberg.

BP credit-default swaps surged 39 basis points after today’s ratings downgrade to 476.5, according to CMA DataVision.

BP’s bonds and CDS have traded as if the company had lost its investment-grade rating. Senate Majority Leader Harry Reid yesterday requested that BP set aside $20 billion in a fund to be administered by an independent trustee to speed up the claims process for victims of the spill.

Fitch changed the rating watch on BP to “Evolving” from “Negative.”

Moody’s Investors Service rates BP debt at Aa2, the third- highest investment grade, and Standard & Poor’s has it at AA-, seven grades above the highest non-investment ranking. S&P downgraded BP by one notch last week.

–With assistance from Abigail Moses in London. Editors: Stephen Cunningham, John Buckley.

To contact the reporter on this story: Brian Swint in London at bswint@bloomberg.net. John Glover in London at johnglover@bloomberg.net

To contact the editor responsible for this story: Will Kennedy at wkennedy3@bloomberg.net

June 15 (Bloomberg) — Federal investigators must determine if BP Plc took risks “beyond industry norms” with the Gulf of Mexico well that exploded and caused the worst U.S. oil spill, Exxon Mobil Corp. Chief Executive Officer Rex Tillerson said.

THE NEW YORK TIMES: From the beginning, the effort has been bedeviled by a lack of preparation, organization, urgency and clear lines of authority among federal, state and local officials, as well as BP. As a result, officials and experts say, the damage to the coastline and wildlife has been worse than it might have been if the response had been faster and orchestrated more effectively.

REUTERS

BP spokesman Tony Odone said the company had “no comment on who our advisers are and what their role is.”

Odone also said there was no truth to a previous report that the company had hired banks with a mandate to defend it from unwanted takeover attempts.

The company has lost more than 40 percent of its market value since the explosion of the Deepwater Horizon rig that led to the worst U.S. oil spill ever.

Millions of gallons of oil have gushed into the Gulf since an April 20 explosion on an offshore rig killed 11 workers and ruptured BP’s well. The spill has soiled 120 miles of U.S. coastline, imperiled a multibillion-dollar fishing industry, and killed birds, sea turtles and dolphins.

There has been much speculation about how the company will deal with the potentially huge liabilities arising from the spill.

Analysts and investment bankers have suggested that the company could sell assets if necessary or even become a takeover target.

Some media reports, including one in the New York Times, have even suggested bankruptcy as a worst-case scenario for the British oil company.

U.S. lawmakers have pressured the company to suspend its quarterly dividend and to set up an escrow account to pay damage claims by individuals and businesses hurt by the spill. More than 50 Democratic senators suggested in a letter that BP should make an initial $20 billion payment into an independently managed account to cover compensation for victims and for clean-up.

The source did not specify what the role will be for the banks. Investment bankers generally advise companies on corporate strategy including mergers and acquisitions and financings.

Bankers and lawyers who are not currently advising BP suggested that the banks could be helping the oil company with issues such as its dividend, valuations of various assets and capital raising schemes.

Goldman, Credit Suisse and Blackstone declined to comment.

BP unveils new oil spill plan as shares tumble

SOURCE ARTICLE

Exxon, which pumps more crude than every member of OPEC except Saudi Arabia, Iran and Iraq, abandoned an exploration project known as Blackbeard in the Gulf of Mexico in 2007 rather than risk a blowout. The company quit the project, which sought to drill more than six miles (9.7 kilometers) beneath the seafloor, after repeated pressure surges indicated the well was unstable.

By Sheila McNulty in Houston

Published: June 13 2010 20:29 | Last updated: June 13 2010 20:29

The chief executives of the world’s biggest international oil companies will testify on Tuesday that the BP oil spill in the Gulf of Mexico “was preventable’’, publicly distancing themselves for the first time from the UK company, the Financial Times has learnt.

Executives from ExxonMobil, Shell, Chevron and ConocoPhillips will say that by following current “best practices’’ companies can avoid such accidents, according to interviews with those who have seen the planned remarks.

COMPLETE FT ARTICLE

MarketWatch

June 14, 2010, 2:18 p.m. EDT

By MarketWatch

SAN FRANCISCO (MarketWatch) — BP PLC executives troop back to Capitol Hill Tuesday for another tongue-lashing over the catastrophic Gulf oil spill. This time, however, lawmakers are pulling BP’s long-time peers into the slugfest.

On Tuesday, the House Committee on Energy and Commerce will question top executives from Exxon Mobil Corp. /quotes/comstock/13*!xom/quotes/nls/xom (XOM 61.37, -0.49, -0.79%) , Chevron Corp. /quotes/comstock/13*!cvx/quotes/nls/cvx (CVX 74.18, +0.12, +0.16%) , ConocoPhillips /quotes/comstock/13*!cop/quotes/nls/cop (COP 52.80, -0.70, -1.31%) and Royal Dutch Shell PLC /quotes/comstock/13*!rds.a/quotes/nls/rds.a (RDS.A 52.38, -0.02, -0.04%) about the spill’s impact on their industry.

Including BP /quotes/comstock/13*!bp/quotes/nls/bp (BP 30.67, -3.30, -9.71%) , these are Big Oil’s Big Five in the United States, all with huge stakes in the future of the Gulf of Mexico and deepwater drilling in general.

When BP’s Macondo well blew out in April, the industry put up a united front. They knew they would all feel the sting of a ban on deepwater drilling and closer regulatory scrutiny.

When they file into this hearing, however, there’s likely to be a crack in that united front. BP has turned toxic, and the others know it. It’s in their own interest now to argue against rules that would hurt the industry while letting BP dangle alone.

And if they leave lawmakers with the impression that the worst oil spill ever in U.S. waters was the result of one company’s recklessness, that’s fine.

But there might be another, more opportunistic motive at work here.

BP’s shares have been hammered. The rest of the offshore oil industry took a heavy blow as well, but many of those stocks are turning around. Energy equities were among the market’s strongest performers last week. Meanwhile, BP continues to tank, down another 8% in New York on a day when almost every other oil company was up. Read about BP’s mounting problems.

There’s increasing speculation on Wall Street and in the oil industry itself that BP might be so badly wounded it can’t recover. If that’s the case, BP’s extensive worldwide assets would be up for grabs.

So it’s hardly any wonder Exxon Mobil, Chevron, ConocoPhillips and Royal Dutch Shell are circling, taking a close look at whether distressed BP assets might make a tasty addition to their own holdings.

Given the political climate in Washington and the sentiment in the marketplace, BP has every reason to suspect it might soon find itself on somebody’s menu.

– Jim Jelter

SOURCE ARTICLE