Tony Hayward, Goldman Sachs, Wachovia, Wells Fargo, UBS, all dumped BP stock before well blowout

Image by Getty Images via @daylife

Excerpted from Darren Weeks, newswithviews
We now know from John Byrne at Raw Story that prior to the Gulf oil mess, not only did Goldman Sachs short shares of TransOcean, the owner of the failed Deepwater Horizon rig, they also ditched 4,680,822 shares of BP stock, worth $250 million and representing 44% of their holdings. “Goldman’s sales were the largest of any firm during that time,” writes Byrne. “Goldman would have pocketed slightly more than $266 million if their holdings were sold at the average price of BP’s stock during the quarter.”

Byrne also noted other financial institutions that also dumped BP holdings.

“Other asset management firms also sold huge blocks of BP stock in the first quarter — but their sales were a fraction of Goldman’s. Wachovia, which is owned by Wells Fargo, sold 2,667,419 shares; UBS, the Swiss bank, sold 2,125,566 shares.”

If that weren’t enough of a “coincidence,” we also had The Telegraph out of London reporting that the chief executive of BP, Tony Hayward, also sold 223,288 shares, worth £1.4 million of stock in his own company (over $2 million) on March 17th — only weeks before the BP Gulf mess. The paper noted that by doing so he “avoided losing more than £423,000 ($614,449) when BP’s share price plunged after the oil spill began six weeks ago.”[13] He took the money and paid off the mortgage on his family mansion in Kent.

At this point, a question should be coming to mind: What did these people know that the rest of us didn’t? How is it that stock in BP and Transocean suddenly seemed so unattractive to those closest to the disaster? Ah, the coincidences! But it gets even better.

On April 10th, The Houston Chronicle reported that Halliburton — the company of which former Vice-President Dick Cheney was CEO — was in the process of acquiring Boots & Coots. Reuters reported that the deal was announced on Friday, April 9th — just eleven days prior to the explosion.[14] The Chronicle noted that “Boots & Coots has become well known for putting out some of the world’s largest oil and gas fires.”[15] The company’s website lists services they provide, including “deepwater application and well inspections, as well as blowout prevention and control counsel or assistance…”[16] According to the Orlando Sentinel, their expertise is already being put to use in the Gulf, as they are “one of two primary companies designing relief-well strategies for the BP blowout.”

So when the acquisition deal is formerly approved by the government, Halliburton — the company famous for profiting from no-bid government contracts in war zones — will have collected for themselves yet another “slick” profit.

This is especially intriguing in light of the fact that, according to NPR, Halliburton’s cementing work — completed only hours prior to the explosion — has become a “central focus” of the Congressional investigation.[18] The Wall Street Journal quotes unnamed “experts” as saying the timing of the cementing in relation to the blast “points to it as a possible culprit.”

But Halliburton isn’t the only company that stands to make a killing off the crisis. The Times Online out of the UK reported that TransOcean itself took out a $560 million insurance policy on the Deepwater Horizon rig. The dollar amount was well above the rig’s value. According to the paper, insurance payouts amounted to a $270 million profit from the disaster.

“The windfall, revealed in a conference call with analysts, will more than cover the $200m that Transocean expects to pay to survivors and their families and for higher insurance costs.”

A number of people have questioned why Corexit — a chemical banned in the UK[21] and is much more toxic than the oil itself — was used as a dispersant in the Gulf. Assuming for the moment that chemical dispersants had to be used, the New York Times reported on May 13th:

“Of 18 dispersants whose use EPA has approved, 12 were found to be more effective on southern Louisiana crude than Corexit, EPA data show. Two of the 12 were found to be 100 percent effective on Gulf of Mexico crude, while the two Corexit products rated 56 percent and 63 percent effective, respectively. The toxicity of the 12 was shown to be either comparable to the Corexit line or, in some cases, 10 or 20 times less, according to EPA.”

Yet, despite the EPA data ranking it “far above dispersants made by competitors” for toxicity, BP chose to dump more than 400,000 gallons of Corexit into the Gulf, order 805,000 more gallons with plans of hundreds of thousands of additional gallons should the spewing continue. Why? More...

Gulf of Mexico: "This is the most vigorous methane eruption in modern human history"

Matthew Brown

It is an overlooked danger in oil spill crisis: The crude gushing from the well contains vast amounts of natural gas that could pose a serious threat to the Gulf of Mexico's fragile ecosystem.

The oil emanating from the seafloor contains about 40 percent methane, compared with about 5 percent found in typical oil deposits, said John Kessler, a Texas A&M University oceanographer who is studying the impact of methane from the spill.

That means huge quantities of methane have entered the Gulf, scientists say, potentially suffocating marine life and creating "dead zones" where oxygen is so depleted that nothing lives.

"This is the most vigorous methane eruption in modern human history," Kessler said.

Methane is a colorless, odorless and flammable substance that is a major component in the natural gas used to heat people's homes. Petroleum engineers typically burn off excess gas attached to crude before the oil is shipped off to the refinery. That's exactly what BP has done as it has captured more than 7.5 million gallons of crude from the breached well.

A BP spokesman said the company was burning about 30 million cubic feet of natural gas daily from the source of the leak, adding up to about 450 million cubic feet since the containment effort started 15 days ago. That's enough gas to heat about 450,000 homes for four days.

But that figure does not account for gas that eluded containment efforts and wound up in the water, leaving behind huge amounts of methane.

BP PLC said a containment cap sitting over the leaking well funneled about 619,500 gallons of oil to a drillship waiting on the ocean surface on Wednesday. Meanwhile, a specialized flare siphoning oil and gas from a stack of pipes on the seafloor burned roughly 161,700 gallons.

Thursday was focused on Capitol Hill, where lawmakers chastised BP CEO Tony Hayward.

Testifying as oil still surged into the Gulf at between 1.47 million and 2.52 million gallons a day, coating more coastal land and marshes, Hayward declared "I am so devastated with this accident," "deeply sorry" and "so distraught."

But he also said he was out of the loop on decisions at the well and disclaimed knowledge of any of the myriad problems on and under the Deepwater Horizon rig before the deadly explosion. BP was leasing the rig the Deepwater Horizon that exploded April 20, killing 11 workers and triggering the environmental disaster.

"BP blew it," said Rep. Bart Stupak, D-Mich., chairman of the House investigations panel that held the hearing. "You cut corners to save money and time."

As for the methane, scientists are still trying to measure how much has escaped into the water and how it may damage the Gulf and it creatures.

The dangerous gas has played an important role throughout the disaster and response. A bubble of methane is believed to have burst up from the seafloor and ignited the rig explosion. Methane crystals also clogged a four-story containment box that engineers earlier tried to place on top of the breached well.

Now it is being looked at as an environmental concern. More...

Obama cuts deal to shield BP assets

Image by Floyd Brown via Flickr

Tom Eley
President Barack Obama reiterated his defense of oil giant BP after a White House meeting with the company’s CEO Tony Hayward and board chairman Carl-Henric Svanberg.

After the meeting, Obama and BP announced the establishment of an independently operated escrow account, the Independent Claims Facility, funded by up to $20 billion paid out over the next four years. BP said it would delay dividend payouts over the remainder of the year estimated at $10 billion. Other details of the escrow account remain vague.

The US media presented the meeting and announcement as a humbling of BP. It was nothing of the sort.

In fact, the meeting was a choreographed event with two purposes: to diffuse popular anger against both BP and the Obama administration, and to assure the financial markets that BP is in no danger of bankruptcy or criminal prosecution. There will be no serious consequences for the disaster that killed 11 workers on April 20 and has since pumped upwards of 60 million gallons of oil into the Gulf of Mexico.

Even were it clear that the $20 billion will really be made available to the blowout’s many economic victims—and it is not—this is a preposterously small sum for a catastrophe whose real cost will run into the hundreds of billions, if not trillions. All the costs of environmental cleanup are to be paid out of this fund, according to the Financial Times. There can be no doubt that this alone will far surpass $20 billion.

The deal ensures that the overwhelming burden of the costs of the disaster will be borne by the government, and ultimately the working class.

“I’m absolutely confident BP will be able to meet its obligations to the Gulf Coast and to the American people,” Obama said in a short press conference after the meeting. “BP is a strong and viable company and it is in all of our interests that it remain so.”

With these words, the Obama administration indicated that it would not seek to force a BP bankruptcy, let alone seize the company, and its goal is that BP continue to be a profitable concern, paying out dividends and gargantuan executive salaries for years to come.

The financial markets were cheered by Obama’s comments. In the hours after the press conference BP’s share price increased sharply, then finished the day up about 22 cents.

Though the administration had done nothing to punish BP, Obama had been under pressure from financial circles to throw it a lifeline. The preceding weeks had seen BP shares tumble by half and on Tuesday Fitch downgraded the company’s credit rating by six notches.

The escrow account is meant to shield BP from potentially hundreds of billions, or even trillions, in damages. While both Obama and BP promised that the account did not mean a $20 billion cap on liability had been put in place, the Independent Claims Facility is a preemptive blow against the tens of thousands of lawsuits BP is likely to face over the coming years.

While it remains extremely vague, the escrow account will be BP’s first line of defense in determining what are “legitimate claims,” a phrase both Obama and company executives have repeatedly used. Those claimants deemed “illegitimate” might turn to the court system for redress, but having been ruled unfounded by a supposedly neutral observer, they will have a black mark hanging over them, and US courts are already notorious for defending corporate privilege.

This is the fate that awaits the blowout’s financial victims. Millions of Gulf Coast residents are likely to suffer financially through layoffs which will ripple through the economy far beyond the fishing and tourism industries, through declining home values in a region already devastated by the real estate collapse, and through, in all probability, an epidemic of health problems.

If there are 10 million such victims—less than the combined population of Louisiana, Mississippi and Alabama, the three states hardest-hit so far—the miserly $20 billion escrow account would mean a mere $2,000 per person. More...

Scientists challenge BP containment claims

Image via Wikipedia

msnbc.com
Some scientists are taking issue with BP's statement that a containment cap placed over a gushing well could be capturing "the vast majority" of oil spewing into the Gulf of Mexico.

They suggest it's misleading, if not irresponsible, to make such a statement when the company has acknowledged it doesn't know how much oil is flowing from the busted well, or how much the spill rate has increased since engineers cut a riser pipe so it could properly fit the containment cap.

"I don’t see that as being a credible claim," said Steve Wereley, associate professor of mechanical engineering at Purdue University and a member of the Flow Rate Technical Group, a national panel of scientists and engineers tasked with determining the spill size.

"What I would say to BP is, show the American public the before and after shots of the evidence on which they’re basing that claim," Werely told msnbc.com on Tuesday.

"I do not know how BP can make that assertion when they don’t know how much oil is escaping. I would say that statement is their hope and aspiration," added Ira Leifer, a researcher in the Marine Science Institute at the University of California Santa Barbara who is also a member of the flow-rate panel.

On Sunday, BP Chief Executive Tony Hayward told the BBC that he believed the cap was likely to capture "the majority, probably the vast majority" of the oil gushing from the well.

Asked in the interview if he was being overoptimistic, Hayward responded: "I think there's no doubt that it has been difficult to predict because all of this is a first. Every piece of this implementation is the first time it's been done in 5,000 feet of water, a mile beneath the sea surface."

On Tuesday, BP said the containment device captured 14,800 barrels of oil the previous day, the highest capture rate yet since the system was installed last week. The company said Hayward's statement was totally consistent with the official spill estimates to date.

"We've always said it was an estimate and there's uncertainty attached to that whatever estimate you choose to go with," said John Pack, a BP spokesman in Houston. "But it wouldn't change the nature of our response, which is to firstly stop what's going on in the subs, to contain the oil and collect it, and protect the shoreline and clean it up."

The official government estimate of the flow rate is 12,000 to 19,000 barrels a day, which means the new device should be capturing the bulk of the oil. But some scientists have said those flow numbers could represent just the lower range and that the rate could be multiple times higher.

Worst-case scenario?
Leifer said based on the data he's seen so far, the rate of flow from the broken well has increase since the initial April 20 explosion at the Deepwater Horizon rig, which killed 11 workers. He believes BP's decision last week to sever the well's damaged riser pipe in order to install the containment cap has increased the flow by far more than the 20 percent BP and government officials had predicted.

In fact, Leifer says, the well may be spewing what BP had called before the spill its worst-case scenario — as much as 100,000 barrels a day from a freely flowing pipe.

He said he's seen no evidence from BP to date that would be inconsistent from that dire scenario.

Judging by live undersea videos, "it looks like a freely flowing pipe," Leifer said. "From what it looks like right now it suggests to me they’re capturing a negligible fraction."

It's unclear how much oil is still escaping because scientists don't have access to enough data and the video feeds show a "disorganized cloud" of oil shooting out of open vents in the containment cap and between the riser and the cap, Wereley said.

"It’s very difficult to judge flow rates from these multiple sources," he said. "My position is that the claims (of capturing the 'vast majority' of oil) cannot be made because the flow is too complicated."