BP's murky deep-water future
BP, which owns 60% of the Mississippi Canyon 252 lease, initially suggested that blame for the accident lay elsewhere (it is not the operator), but the company has accepted responsibility for claims it acknowledged will exceed the current $75 million cap established by the Oil Pollution Act. On Monday, BP said it has spent $350 million so far on cleanup and other costs associated with the massive spill.
"If BP is successful in the next two weeks, costs could be under $1 billion," says a May 3 research note from Oppenheimer & Co., an investment firm. "If all failed until the relief well is completed in 90 days, costs could be significantly higher." By comparison, the Exxon Valdez accident 20 years ago cost more than $3.5 billion in cleanup and $5 billion in damages.
Others say BP can expect to take a hit of $6 billion or more -- in addition to its share-price loss. On Wednesday, Moody's revised its outlook for the company to negative, noting that "it is too early to exclude scenarios leading to downward pressure on [BP's] Aa1 rating."
How much of a punching bag a Democratic-controlled Congress makes of BP is another unknown variable. And, perhaps more significantly, it is also unclear whether other oil companies will opt to avoid BP as a partner, particularly on U.S. projects.
"We have every oil company and oil services company under the sun engaged with us," says David Nicholas, a spokesperson for BP. Nicholas also noted that whatever is learned from the spill will provide "invaluable lessons for the whole industry."
BP, which pioneered deepwater drilling in the North Sea, has the biggest industry presence in the Gulf in terms of leases, production, reserves, and the overall investment -- and any shift to rebalance its portfolio worldwide would be another expensive consequence of the blow-out. Although the company says it has no plans to do so, if containment and clean-up efforts go badly, brand consultants have even suggested BP may be tempted to change its name.
