BP v. The Chumps
Last week when sir chump took to swearing at BP, I decided it was time to put the chump in his place and explain why BP is a must own stock.
Fist off, let's discuss what we know factually, then the Greens can come out the woodwork running their mouths.
1) The blow out preventer failed.
2) BP has been acting in good faith paying every legitimate claim and many other coming to them.
3) BP is currently engaged in drilling two additional relief wells
4) Taking the most exaggerated figures you can, the well has dumped two Valdez sized spills in the gulf.
5) A valdez sized spill is roughly the size of an olympic pool full of oil
6) The oceans have 340 quintillion gallons thus, if you were to compare the spill to the sized of the ocean on graph paper and place a single red dot to represent the oil spill, you would need a microscope to see the red dot.
7) The gov sent a SWAT team to the rig site and Holder sent a dozen DOJ attorneys to the site. 40% of the members of this Federal Gov first response got sea sick on the way out and were barfing chunks and chumming for red snapper. I am surprised that Sir Chump and Holder didn't take to a boat. Now that would have been funny.
So when BP requested assistance from the public I chipped in a dozen recommendations some of which included multiple valve caps to prevent hydrate formation as well as proper methods for cutting the bolts to take advantage of the machined flange surface. BP ignored most solutions then it dawned on me why... and light came to my brain and I then realized that BP was actually doing some very smart things... Why?
1) They had no guarantee that oil would be found with the first well. It could have been a duster.
2) They struck oil and the BOP failed. Sadly this caused an explosion fire an tragic loss of life. But it also left the unanswered question as to why a BOP would fail. The answer is that it failed due to the enormous and completely unanticipated and unexpected well head pressures. Why?
3) The oil reserve is vastly larger than they thought. The pressure tells you that. This is the first really deep well and what it tells us is that the deep ocean reserves are gigantic. So in a way, BP is sad, confused, and very sorry about the accident and at the same time are wetting their pants at what they have actually discovered.
4) How do we know the pressures are high? Well for one thing, the pressure on the ocean floor exerts roughly 2220 psi of salt water on every object including the opening of the 23" wellhead pipe. So in theory, salt water should be rushing down the well head but its not. The wellhead is pumping out oil like a cannon and the only place it gets pressure is from the reserve itself. So this is not a well but a superwell.
5) The same thing happened when they went to cap this thing. BP stupidly thought that salt water would leak into the seal. The work was done sloppily after the diamond cutter failed. It failed because BP did not have the moment arm correctly configured and I told them so before cutting. But they don't listen too well. Generally this is because they have some "senior engineer" that doesn't know much but drinks a lot and sadly is in a vertical organization making decisions over vastly more intelligent subordinates. That being said when they capped this, water wasn't about to seep in because the pressures were so high that the oil poured out. So BP engineers rightly figured that if they could siphon pump the oil out of the cap fast enough they could capture most of the oil. That was their first correct assumption.
6) Meanwhile BP is drilling not one but two relief wells. This time they will have BOPs that are built and designed for a superwell. So when all is said and done, BP will have three taps into what may be one of the largest reserves ever discovered and the first of what will undoubtedly be many more deep ocean wells.
So lets talk about the Greens since they will be howling by now.
1) Woods Hole did research on the natural ocean seepage off Santa Barbara in which oil leaks the size of between 4 and 80 Valdez spills occur each year and the Pacific handles it with little fanfare. There are many natural seeps of oil on the deep oceans and they do not cause any environmental damage.
2) When it comes to getting gov handouts nobody yells louder than the Katrina people. So when Hurricane Katrina came along it dumped a lot of sand up on their wetlands. And there were great prognostications that this would destroy the wildlife for years to come. So the Katrina clan not happy with just accepting the fact that hurricanes occur, tried to come into the courts with Comer v. Murphy Oil. to suggest with a straight face that Murphy Oil, a Virginia company had manufactured substances that increased carbon dioxide in the air, and that those very molecules, heated up the oceans..... it gets better.... and caused hurricane Katrina. Of course they never really figured out why Katrina came in to hit New Orleans but with such a crazy postulation does anyone really care? This case was tossed out of the Federal District court on its ass. It was appealed and heard by a three judge panel consisting of two old very old liberal judges that basically hated the oil business. Instead of hearing a politically charged case en blanc, these old goats let the case enter the District Court! It was appealed again and accepted by the 5th Circuit to be heard this time en blanc. Plaintiff's attorney decided to get cute and got the judges that owned any oil related stocks to recuse themselves. The result the Court lost is quorum and the Plaintiff's case was dismissed. But the point of this is that had this gone through, a Katrina plaintiff could have sued somebody in Maine for exhaling carbon dioxide on the same legal theory. I am not going to discuss the rules of standing for access to the Federal Courts except to say the Courts are not to accept any case unless it has a "high likelihood" of prevailing in the Courts. Like I said, nobody howls like the Katrina people looking for a handout.
3) So how bad is the environmental damage? Well with the exception of a few jelly fish and a hanful of birds, the damage has not been much. There have been no reports of major fish kills and aside from some wetlands in Louisiana, Florida, Mississippi and Texas have been pretty much untouched. A few tar balls have been collected but you can find them on any Beach in America. But the great howling about the environment comes from people who have retired on the Florida beaches who spend most of their lives preventing others from walking on "their" beaches. So now they are hyper-concerned about the environment, the same environment their bloody houses destroyed 30 years ago when they bulkheaded in all the wetlands.
4) 2/3 of the gulf is still opened to commercial fishing. Of course the Katrina fisherman that are bellyaching the most, claim all kinds of damages to their businesses only they don't pay any taxes or keep books so they can't prove damages in court. Gee, that's tough.
What about BP? Bloomberg is constantly running hedge fund articles about how BP will go broke... Really?
1) My estimation of the total worst case BP cost in courts would be 1 Billion beyond what they have already paid out. So lets say BP was very generous indeed and say what the heck, and went in for 5 billion or even 10 billion to set up a water park for bird oil studies and jellyfish washing and induled in every cockeyed liberal Green fantasy. Lets's say they also stocked all the Walmarts with an extra large supply of big screen TVs for the next hurricane we could see the Katrina people floating 60 in flat screens on rafts in downtown New Orleans.
2) BP presently has 25 to 30 billion in cash with a min additional credit line of 30 billion. Excluding the three new deep wells, they produce 400K bbl of oil a day out of the gulf. BP is also the only major that does not buy middle east oil. BP also has huge properties in Alaska as well as part ownership in the Alaskan pipeline. In short, BP will easily weather this blow hard government an the howling Greens.
3) BP is presently applying the Rope-a-dope technique pioneered by Mohammad Ali. Every group that bellows at them, they apologize. They continue to accept punches from every loudmouth liberal in government. It is as they can't defend themselves as if they are Mother Teresa in a fight. They turn the other cheek. They absorb the ridicule. Even that of Sir Chump who has sicked Holder on them with the threat of "Criminal" charges. This is Sir Chump's weapon of choice other than the jawbone of an ass used by Samson in the Bible. They used it with Toyota... They used it with Goldman, they used it with AIG. But BP just turns the other cheek and keeps on trying to report their positive news that they are getting more oil from the leak.
4) BP is already planning a new "cap" and undoubtedly they will use the Flange as I have previously described to them. So meanwhile they will pull more and more oil up and next month when they finally cap it with a hurricane provision, they will be near to the completion of their two relief wells.
5) BP will not only survive, they will thrive. They are also going to do a lot better with things in court where claims have to be proven rather than shouted from some empty headed big mouth.
Final notes about the whole gulf thing and a few extra philosophical thoughts:
1) I don't really know what has happened to Americans these days. They seem very stupid to me. In the 1950's there were 150 million people, mostly blue collar but very competent. In 1970, the first oil shock there were 170 million people, we Vietnam, the war on poverty and the whole handout scheme started and the US was broke. Now we have 310 million plus another 30 million illegal immigrants all putting more pressure on the demand for energy. We are 13 trillion in debt, our interest payments exceed our annual tax collection. Libs just want to raise more taxes and spend more; it won't work.
2) The Greens blow off all the time about ethanol, wind mills and solar panels and battery cars. They hate nuclear and they really hate oil but that doesn't get them to stop driving or stop using air conditioning or heating. Yet the Greens don't do math. Ethanol has a built in oil deficit of 70,000 BTU. That means the diesel fuel required to farm the corn and process and deliver ethanol costs more in oil energy than the ethanol can produce. And the land that could have fed 11 people feeds nobody so food gets more expensive. Yet we have this junk in our gas pumps and it makes Greens feel good about themselves, yet it wastes more oil.
The same deficit occurs with windmills. They are not cost effective. Germany and Spain bought over 150 billion dollars worth of windmills and the total lifetime power generation will be less than 20 billion dollars worth for their lifetime. Solar cells are even worse producing roughly 200 flux watts for 5 hours a day. That will light a bulb. Each of these technologies requires more oil and fossil fuels than the energy they can produce. That is a mathematical fact in an expanding universe.
Nuclear which is cost effective in other countries, is not mobile and is underutilized in the US due to superstitious fears of the Greens.
3) Bottom line is oil is the most important substance on earth. Unless the US wants to get its population under control, we are condemned to run out of oil. There is no measure of conservation that can stop the population freight train and its collision with the emerging countries for oil.
4) While the US uses the most oil we do so in direct proportion to our economy and populations. It is an exponential demand. If the US would reduce its population by just 1% a year, in 70 years we would be back to the 1950s population of 150 million and we would have abundant resources.
5) Finally I want to bust the last great oil myth that Americans are somehow the gluttons of the energy world. When you examine per capita oil consumption, the United States ranks about #23. We rank under Canada, Greenland, the Virgin Islands, Gibraltar, Iceland, the Bahamas, Guan, Aruba and others. But when you hear the Greens it is out Hummers and our SUVs that carry the brunt of the thoughtless mathless howling.
America has always, until falling prey to the lords of welfare and environmental insanity, been a country that could do the seemingly impossible. We invented nuclear power, we went to the moon, we invented ocean drilling, robotics, computers and the clapper. Al Gore invented the internet. He also invented the art of the Defcon One shouting technique in which his face turns red and his blood vessels press from his forehead as he describes with great detail, and no science degree, the horror of polar bears cooking in a melting arctic stew. Yet never does he talk about the real encroachment of man's sprawling population on wildlife and the exponential demands that puts on oil. So unless you plan to stop using oil entirely a mathematical impossibility, then man is going to go after these deep superwells and if we don't get there then we will be buying it from someone else, maybe a dictator like Chavez or some madman out of the middle east.