We’re going to need a decoder ring in coming weeks just to understand what all the pending BP spill investigations really mean, including news this week from the presidential commission that might, at first blush, seem to be negative for the oil giant. But the news actually sent the company’s stock higher and no doubt has its lawyers popping corks on at least two continents.
And the commission information is being carefully released to make sure nobody misses the point. The group, which conducted its probe without subpoena power, is expected to release a final report next week. But it went ahead and released a chapter that the Washington Post explained thus: [the commission]….blamed the Gulf of Mexico oil spill last year on ‘missteps and oversights’ by oil giant BP, rig owner Transocean and contractor Halliburton, saying those errors were “‘rooted in systemic failures’ and could happen again.”
That is followed by this from the commission: “The blowout was not the product of a series of aberrational decisions made by rogue industry or government officials that could not have been anticipated or expected to occur again. Rather, the root causes are systemic and, absent significant reform in both industry practices and government policies, might well recur.”
It seems negative enough, right? And then the commission included some blah, blah, blah indicating BP and other industry management was really bad and government oversight efforts need more resources. To decode the real meaning of the selected 48 pages, let’s look at an Associated Press report datelined from London: “Shares in BP PLC opened higher Thursday after a U.S. presidential commission criticized the oil company’s contractors and regulators as well as BP for the Gulf of Mexico oil spill…BP shares were up 2.1 percent to 510 pence ($7.90) in midmorning trade on the London Stock Exchange.”
The AP quotes Richard Griffith, identified as analyst at Evolution Securities, who explains that the report “supports our view that a gross negligence case against BP looks hard to prove and could ultimately reduce BP’s liabilities…we have argued for some time that it would be hard to prove gross negligence against BP in which case even if BP assumes 100 percent liability for Macondo the impact would be $25 billion to $30 billion.”
Gross negligence, of course, greatly increases the potential liability – doubling government fines.
Even better for BP, the presidential group seems to go out of its way to make sure the blame is spread around the industry and onto government regulators. This is a key BP talking point – remember that leaders from BP competitors have painted the company as a rouge agent, saying they would have done things differently. BP needs to deflect the blame as much as possible.
Comments like this from former U.S. Senator and commission co-chair Bob Graham will help that effort: “The Macondo blowout was the product of several individual missteps and oversights by BP, Halliburton and Transocean, which government regulators lacked the authority, the necessary resources and the technical expertise to prevent.”
Make no mistake, this presidential commission report – or at least what was released, and you have to wonder what’s in the rest of the report to make that necessary… perhaps competing views? – is sure to help BP get its corporate life back.
It is NOT a victims’ rights manifesto.
Check out the Washington Post story here: http://www.washingtonpost.com/wp-dyn/content/article/2011/01/05/AR2011010504631.html?hpid=topnews
Check out the AP report via the Miami Herald coverage here: http://www.miamiherald.com/2011/01/06/2003071/bp-shares-higher-following-us.html
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