Category

Oil

Oil Sector Expert Kent Moors Sees Tough Times, Stricter Regs For BP After Oil Spill

Energy expert Dr. Kent Moors is angry. And the main target for that anger is BP PLC (NYSE ADR: BP).

At its core, the Deepwater Horizon explosion and oil spill is a human tragedy: 11 workers were killed, others were injured and now many Gulf Coast residents will end up losing their homes and livelihoods.

But that's not all that has Dr. Moors seeing red: The accident that resulted from BP's incomprehensible risk-taking has killed an energy bill that could have set the U.S. economy on a course for energy freedom, and is going to summon the heavy hand of government in a way that will cost American consumers dearly while also keeping regular U.S. investors from reaping green.

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Two Energy Stocks For a Post-Oil-Spill World

With the failure of the BP PLC (NYSE ADR: BP) "top kill" strategy, the Deepwater Horizon oil spill takes on a more serious hue, both for the Gulf of Mexico environment and for BP itself. If it indeed proves impossible to cap the oil flow before August, public anger against BP and against deep-sea drilling in general may put BP out of business and set deep-sea drilling around the United States back for years.

The business fallout from the oil spill could be widespread. As was true of the Three Mile Island nuclear accident of 1979, the Deepwater Horizon oil spill could end up causing massive damage to companies that were in no way involved with the BP tragedy. Risks of different types of operation will be reassessed, new rules will be enacted, and the energy business will change radically.

Smart investors will anticipate these changes.

To discover two stocks poised to thrive in a post-oil-spill world, please read on...

BP's Sharp Stock Drop Prompts Takeover Rumors as Gulf Oil Spill Disaster Spirals Out of Control

BP PLC's (NYSE ADR: BP) share price has plunged by more than one-third, as the company has struggled to contain the Gulf oil spill. Now, the company is being rumored as a takeover target as its stock has yet to find a floor.

BP shares have tumbled 36% since the company's leased drilling rig Deepwater Horizon exploded on April 20. The company has lost a third of its market value – $75 billion – stirring rumors that there could be acquisition interest. About $17 billion in losses came on Tuesday alone when the stock plunged 15%.

"There is a 10% to 20% chance of BP being taken over," Gudmund Halle Isfeldt, an analyst at DnB NOR ASA, told Bloomberg News. "The only real candidate, in size and with similar operations globally, would be Royal Dutch Shell [PLC (NYSE ADR: RDS.A, RDS.B)]."

BP's drastic market value loss could make it cheap enough to attract buyers, but some analysts say the total cost and implications of the spill are too vague to justify a commitment.

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Gulf Oil Spill Could Cost BP More Than Half its Net Income

As its engineers struggle to plug an underwater oil leak in the Gulf of Mexico, the total cost of the spill to BP PLC (NYSE ADR: BP) continues to mount, and might even threaten the financial stability of the company.

The total cost to BP to date has reached about $760 million, or $22 million a day, compared with an initial estimate of $6 million a day last month, the London- based oil company said. BP's net income in 2009 was $16.6 billion, or $45.4 million a day, in that time, according to separate data compiled by Bloomberg.

"The longer it takes, more costs are going to be incurred," Greg Smith, managing director of research firm Fat Prophets in London, told Bloomberg in a telephone interview yesterday (Monday).

The final bill, which may not be known for more than six months and will heavily depend on the outcome of pending litigation, may be as much as $10 billion, he said.

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Crack Spread Plummets as Refineries Suffer Through Petroleum Supply Glut

U.S. refineries are in the midst of a petroleum supply glut that's driving down profit margins for refining crude –the crack spread-and depressing prices by over 25% since last week.

U.S. supplies of oil and all petroleum-based fuels were at the highest levels in at least 20 years, jumping to 1.81 billion barrels for the week that ended May 14, knocking profit margins at refineries off a 15 month high.

The crack spread–the profit margin that an oil refinery can expect to make by "cracking" three barrels of oil into two barrels of gasoline and one barrel of heating oil-traded as low as $11.33 a barrel Friday on the New York Mercantile Exchange (NYMEX). It touched $16.909 on May 13, the highest price since Feb. 12, 2009. The margin has dropped 62% from a record $30.479 reached on May 17, 2007.

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What Insiders Don't Want You to Know About "Peak Oil"

Why did the oil industry impose a media blackout at a recent summit of industry giants in Mexico? The answer explains why thirsty nations are already pitted against each other in a cutthroat brawl for ever-dwindling oil supplies. Read this report to find out two ways to profit from the coming shortage of black gold.

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How to Profit from the Other Oil Story in the Gulf

While much of the attention remains fixed on BP (NYSE: BP), Transocean Ltd. (NYSE: RIG), Halliburton Co. (NYSE: HAL), and on the attempt to plug a gusher in the Gulf, I have been watching another development down here in the Caribbean this week. It is going to impact crude oil and oil product movements throughout […]

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Occidental Petroleum Leads Onshore Oil Hunt as Offshore Drilling Faces Tighter Regulation

Occidental Petroleum Corp. (NYSE: OXY) announced yesterday (Wednesday) it was doubling the capacity estimate for a California oil field discovery as U.S. offshore drilling restrictions fuel onshore interest.

The Los Angeles-based oil explorer has focused on onshore oil production for years and estimates its current discovery near Bakersfield, California holds up to 500 million barrels of oil, valuing it at more than $34 billion at current prices.

"There is a lot of new interest in onshore-production potential in the U.S. and Occidental is at the forefront of that," Brian Youngberg, an analyst with Edward Jones & Co., told Bloomberg.

Occidental, the fourth largest U.S. oil and gas producer, made the announcement at a meeting with investors and analysts Wednesday in New York. Chief Executive Officer Ray R. Irani detailed the company's long-term strategy for profitability.

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China Continues Its Run on African Commodities With $23 Billion Nigeria Oil Deal

China signed a $23 billion oil deal with Nigeria Thursday, reducing Nigeria's fuel imports and positioning China within reach of high quality African oil reserves.

China State Construction Engineering Corporation Limited (CSCEC) signed the deal to build three oil refineries with Nigerian National Petroleum Corporation (NNPC), which said this could be the biggest deal China has ever made with Africa.

Nigeria, Africa's leading oil producer, imports about 85% of its fuel because of the poor condition of its refineries. Shehu Ladan, head of NNPC, said at the signing ceremony that the added refineries would reduce the $10 billion spent annually on imported refined products.

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Question of the Week: Readers Respond to Money Morning's Oil Spill Query

News of BP PLC's (NYSE ADR: BP) Gulf Coast oil spill was only hours old when Money Morning readers first weighed in on the tragedy. The chief concern: U.S. taxpayers will yet again be stuck with the tab for a problem caused by corporate malfeasance and lax governmental oversight.

Stricter government regulation could enforce safety shut off valves with remote control operations – a device that could have prevented the current disaster. The hefty $500,000 price tag on the safety control has been a past deterrent, but hard to argue against in the wake of the billion-dollar Gulf spill.

But investors understand that the long haul is what really matters, meaning that there's perhaps a bigger question here than who's at fault, and what will this cleanup cost….

Washington wants to limit U.S. dependence on foreign oil and create jobs, while also protecting natural resources and preventing future spill disasters. But the United States faces a future in which oil prices are likely to soar as thirsty nations compete for dwindling supplies.

Clearly, our leaders in Washington, the U.S. energy sector and U.S. environmental agencies and interests will have much to debate in the months and years to come.

This prompted last week's installment of Money Morning Question of the Week: Is U.S. offshore oil drilling going to disappear – why or why not? How does the industry affect you as an investor, taxpayer and consumer?

Here is a collection of thoughtful reader responses regarding the future of drilling and the oil spill.

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