Gulf oil spill commission report: Good news for BP?
The president's commission on the Gulf oil spill has roundly criticized BP's role in the disaster. But it's appearing less likely that the British oil giant will be charged with gross negligence.
Atlanta — British oil giant BP saw its stock price continue to rise Thursday, even as a presidential commission put the brunt of liability for last year's Deepwater Horizon accident and spill at its doorstep.
Since losing half its worth after the explosion, the much-maligned 102-year-old global conglomerate has recovered nearly two-thirds of its stock value – 10 percent this year alone – as investors feel increasingly confident that BP won't, in the end, be charged with gross negligence for its role in a disaster that killed 11 rig workers and caused the worst offshore industrial oil spill in US history.
A finding of gross negligence would drastically increase the amount of fines that the United States could levy against the firm.
An excerpt of the commission's report on the Gulf oil spill was released Wednesday. In it, the commission said that the accident was primarily caused by systemic failures linked not just to BP, but to contractors Halliburton and Transocean. Government regulators didn't have the manpower or training to properly police the drilling industry, the commission added.
The blowout "was not the product of a series of aberrational decisions made by rogue industry or government officials," the excerpt concluded. The full report will be released next Tuesday.
"I reluctantly conclude we have a system-wide problem," oil-spill commission co-chairman William Reilly added in a separate statement.
The commission's conclusions hardly mean that life is about to get back to normal for BP or the US domestic oil industry. New drilling has ground to a halt as Washington prepares tough new regulations aimed at preventing what the commission calls a possible recurrence of a Deepwater-style accident.
Wednesday's report blamed BP and its management for seven of what the commission says are nine key causes of the accident. The nine-member panel, however, stopped short of saying that the company deliberately undercut safety to save money. But, it noted, the company did too little to ensure that corner-cutting didn't compromise the integrity of the Gulf well.
The commission's work has also unearthed fast and loose "risk/reward" decisions made by BP that critics say are too pervasive in the drilling community. An e-mail written by a worker whose assessment of the rig's cementing operation was overruled has been widely cited as evidence of worrisome industry norms. The worker appeared to be resigned to the situation: “Who cares, it's done, end of story, will probably be fine," the e-mail read.
Despite industry pressure, the US Interior Department has taken its time writing and implementing new regulations. These rules include more-rigorous inspections of blowout preventers and a mandate that independent engineers have to sign off on changes in well designs.
The failure by BP rig bosses and BP managers in Houston to properly test a slew of changes to the well design as the company prepared to temporarily cap the well added to a misreading of a crucial pressure test. This was among the key causes of the disaster, the commission has found.
Still, the commission also blasted the cement contractor, Halliburton, for failing to properly test a crucial cementing operation and Transocean, the rig owner, for failing to heed lessons of an "eerily similar" near-blowout that the company experienced in the North Sea in 2009.
Investors, meanwhile, were heartened by a statement by Kenneth Feinberg, the trustee of a $20 billion BP fund aimed at repaying Gulf residents and companies for losses from the spill. Total payouts, the statement indicated, will equal closer to $10 billion. The balance will go back onto BP's books.
Stock analysts also expect BP to resume its dividend payments, which were suspended last summer at the request of President Obama.
To be sure, the US government is likely to levy record fines against the company as a slew of investigations, including a criminal probe, come to a close.
But thanks to management changes – including appointing Americans to top executive positions – and the changing political landscape in the US, the beleaguered oil giant's future now seems far more secure than it did as the company scrambled last summer to try to close the spewing well amid public-relations missteps. At the time, some said BP could face bankruptcy.
If BP is not found grossly negligent, that will also allow the company to bill two junior partners in the well project – Anadarko and Mitsui – for a third of the costs of the spill, thus improving its financial picture. According to a J.P. Morgan estimate, the fines from a gross-negligence charge could have topped $69 billion, which would have hobbled BP's financial health and potentially doomed the company. Without the gross-negligence charge, BP's final bill is now estimated to be closer to $20 billion.
"What seems to be coming through [the report] is there was an unfortunate string of accidents which led to the disaster," Peter Hitchens, a broker with London's Panmure Gordon & Co., told the Guardian newspaper in England. "BP had a near-death experience. But time is a great healer for BP it seems."