Archive for June 17th, 2010


Lawmakers accuse BP chief of evasion over oil spill

Lawmakers accuse BP chief of evasion over oil spill

Thursday, June 17, 2010

BP boss Tony Hayward has vowed the British energy giant will repair the economic and environmental devastation caused by the Gulf of Mexico oil spill as he was quizzed by irate lawmakers.

‘I know that only actions and results, not mere words ultimately can give you the confidence you seek. I give my pledge as the leader of BP that we will not rest until we make this right,’ a contrite Hayward said on Thursday.

Saying it was too early to pin down the causes of the April explosion on a BP-leased rig off Louisiana, Hayward pledged: ‘We and the entire industry will learn from this terrible event and emerge stronger, smarter and safer.’

Some lawmakers have publicly suggested senior BP officials should ‘commit hara-kiri’ over what has become the nation’s worst ever environmental disaster.

Amid tight security and sitting alone at a table to face congressmen and a media barrage, Hayward was sharply criticised in his first public appearance before Congress since the catastrophe was unleashed on southern U.S. shores.

‘I’m sure you will get your life back, and with a golden parachute back in England. But we in America are left with the terrible consequences of BP’s reckless disregard for safety,’ said Democratic Representative Bart Stupak.
Stupak, who chaired the hearing, was referring to a much-denounced statement in which Hayward, who has been the public face of the disaster, had said he wanted it to end so he could get on with his life.

At one point, a protester disrupted the hearing. ‘You need to be charged with a crime, Tony,’ she shouted. ‘You need to go to jail!’

She grappled with police and kept shouting as she wrestled with police trying to restrain her.

Tensions have been running high with millions of barrels of crude fouling the shorelines of four U.S. states, closing down fishing waters and hitting the region’s vital tourist industry.

On Wednesday BP agreed to set up a $20 billion escrow fund to pay compensation claims from thousands of Gulf businesses and residents facing economic ruin.

The deal was struck after Hayward and BP chairman Carl-Henric Svanberg were summoned to the White House for talks with U.S. President Barack Obama.

News of the escrow fund deal with the U.S. administration sent BP’s share price soaring almost 10 per cent on Thursday, after days of falls sparked by uncertainty over its future.

The fund will be run by prominent lawyer Kenneth Feinberg, who managed compensation claims by victims of the September 11, 2001 terror attacks, and will be overseen by a panel of three judges who can hear appeals.

BP will fund the account in four annual payments of $5 billion, the White House said in a statement, adding it was ‘neither a floor nor a ceiling’ on BP’s total liability for the disaster.

The firm’s final bill will be tied to the amount of oil still spewing into the ocean each day, with U.S. experts putting that figure at between 35,000 and 60,000 barrels.

Hayward told lawmakers BP is now siphoning up an average of 20,000 barrels a day of oil to two processing ships on the surface.

The U.S. disaster coordinator, Admiral Thad Allen, said by ‘sometime early next week’ the company hoped to be containing 28,000 gallons – some of which will be burnt off by one of the surface ships.
And in some good news, Allen said drilling on a relief well, seen as the only way of permanently capping the spill, was ahead of schedule.

‘Mid-August was the target date; they’re actually ahead of schedule right now, but I’m not going to guarantee it will be earlier,’ Allen said, citing the meticulous work needed in carrying out the work safely.

‘We should be very wary about hard deadlines,’ he cautioned.

Analysts said BP, which has spent about $1.6 billion battling the spill and made a profit of about $14 billion in 2009, should be strong enough to weather the storm even if it has to borrow more.

‘They have enough cash flow and quality assets that will allow it to fund that type of liability,’ said Jason Gammel of Macquarie Research.

Amid deepening anger over the spill, Louisiana Representative Joseph Cao told one of Hayward’s colleagues this week that even the resignations of BP officials would not be enough.

‘In the Asian culture we do things differently. During the samurai days, we just give you a knife and ask to you commit hara-kiri,’ he said.
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• Source(s): British Petroleum PLC and Sky News / BSkyB / News Corporation


AOL sells Bebo for scrap – and a $275 million tax break

AOL sells Bebo for scrap – and a $275 million tax break

Thursday, June 17, 2010

••• AOL Inc is paring back its ambitions in online social networking, selling a website called Bebo that it bought a little more than two years ago for $.850 million. when AOL was still part of Time Warner Inc.
Bebo, which was launched in 2005, has failed to match the huge popularity of sites such as Facebook and Twitter.

It has been strong in foreign markets, though, including Britain.

AOL tried to take advantage of that to drive traffic to its other ad-supported web properties, but the site has been losing ground.

Worldwide, it had about 12.6 million users in April, less than half of the 26.9 million it had in the same month a year ago, according to comScore Inc.

In the U.S., Bebo was down to 4.9 million from 10.2 million a year earlier. In the same period, Facebook has grown to 121.8 million users in the US from 67.5 million.

AOL said in April it planned to shut Bebo or sell it. The company said on Wednesday the buyer is the private investment firm, Criterion Capital Partners LLC.

The California firm did not say how much it is paying, but analysts have speculated that the site would fetch just a small fraction of what AOL paid for it. In a note AOL CEO Tim Armstrong sent to employees on Thursday, he said the deal provides a ‘meaningful’ tax deduction for AOL.

AOL said in a filing with the U.S. Securities and Exchange Commission it expects to log a tax benefit of $275 million to $325 million in the April-June quarter. The company also said it will assess whether it needs to write down the value of its business overall for the quarter.

In his note, Armstrong also said the sale would let Bebo users continue to use the service.

Criterion Capital Partners are specialists in facilitating growth plans and turnarounds and are well-placed to drive Bebo’s effort to strengthen its foothold within the highly competitive social networking arena,’ he wrote.

In April, AOL unloaded another service that it had acquired for more money. It agreed to sell its ICQ instant messaging business for $187.5 million in cash to Russian internet investor Digital Sky Technologies. In 1998, AOL, then known as America Online, paid at least $US287 million to buy Mirabilis, the Israeli company behind ICQ.

AOL shares fell 8 cents to $22.20 in afternoon trading.
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BP CEO Tony Hayward “Devastated” by Oil Spill

BP CEO Tony Hayward “Devastated” by Oil Spill

Thursday, June 17, 2010

BP’s chief executive says he has been ‘personally devastated’ by the explosion of the Deepwater Horizon oil rig and understands the anger Americans feel toward him and his company.

In testimony to be delivered to a Congressional Committee later today, Tony Hayward says BP does not yet have answers to important questions about the spill, which has dumped millions of gallons of oil into the Gulf of Mexico.

But Mr Hayward says he knows there will be hard feelings until the leak is stopped, and until it is, ‘no words will be satisfying’.

Mr Hayward is expected to face tough questioning from the Congressional panel who believe BP cut corners to save money.

On Wednesday he joined company chairman Carl-Henric Svanberg at the White House for a meeting with President Obama during which BP agreed to place $20 billion into an independently-managed compensation fund.

BP has also announced it will suspend its dividend payment to shareholders.

Mr Svanberg said: ‘I hear comments sometimes that large oil companies are greedy companies or don’t care, but that is not the case with BP. We care about the small people.’

Although a BP public relations spokesman described it as a ‘slip in translation’, the remark drew icy comments in the U.S. for its perceived condescending tone.
For the community of Orange Beach, Alabama, where oil has washed ashore from the massive leak, news of a claim fund is welcome.

Hundreds of residents attended a town meeting on Wednesday to put their questions and concerns to the town’s mayor and a senior representative from BP.

Crowded into the town’s public gymnasium, resident after resident queued at the microphone to express their frustration at the pace and organisation of the clean-up effort and the time it is taking for compensation to be paid.

‘People need help and they desperately need it now,’ said one man.

‘What is the potential for health effects on us? Will it get bad enough that it will require evacuation of some type?’ asked another.

‘We got a lot of boats out here that wants to workbut it’s been disorganisedwe want to work,’ said one.

One woman thought the ‘Queen of England’ should apologise for the disaster.

Mayor Tony Kennon summed things up. He said: ‘People are in shock, they have no earthly idea how they are going to survive.’
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• Source(s): British Petroleum PLC and Sky News / BSkyB / News Corporation


BP agrees $20 billion compensation for Gulf of Mexico oil spill victims

BP agrees $20 billion compensation for Gulf of Mexico oil spill victims

Thursday, June 17, 2010

Embattled oil giant BP has frozen payments to shareholders and will offload billions of dollars in assets to cover costs from the Gulf of Mexico oil spill.

On the same day that the firm was dragged to the White House, where it agreed to set aside $20 billion for spill costs, executives announced a series of belt-tightening measures to save the company around $17 billion this year.

Emerging from a meeting with President Barack Obama, BP chairman Carl-Henric Svanberg vowed the firm would live up to all ‘legitimate responsibilities’, as executives moved to reassure investors the 101-year-old firm will not go under.

Regular payouts for shareholders will be frozen for the rest of the year, Svanberg said, saving the firm an estimated $7 billion and quelling a major source of public anger.

Top U.S. lawmakers had demanded the company cover all costs of the spill before rewarding shareholders with a dividend that usually amounts to around $2.5 billion per quarter.
‘The BP board decided we will not pay any further dividends this year,’ said a contrite Svanberg, as he apologised for the spill.

‘Words are not enough. We understand we will and we should be judged by our actions.’

Meanwhile BP chief financial officer Byron Grote told investors the company would try to offload $10 billion worth of assets this year to save costs.

Outlining a ‘deeply conservative fiscal approach’ in the face of still unknown costs of the spill, Grote said the firm would sell mainly ‘non-core’ assets.

BP must pay $5 billion into the escrow fund by the end of the year and a billion dollars each quarter for the remaining three years.

While the fund is being built, BP said it would set aside $20 billion worth of U.S. assets as collateral.

Grote said the 20 billion figure came from ‘negotiation with US government officials,’ he said.

‘Setting up this fund is merely a vehicle… if the fund is not fully utilised then BP would be able to pull out any residual funds that are in there.’
The White House meanwhile insisted that the fund’s value of $20 billion dollars was ‘neither a floor nor a ceiling on liability,’ and announced BP would also chip in an additional $100 million to help oil workers who have lost their jobs.

The account will not be used to pay fines or penalties that BP incurs.

Wall Street reacted positively to the news, with BP’s shares trading up around 1.5 per cent in New York at the close.

Analysts said BP, which has already spent some $1.6 billion battling the spill and made a profit of around $14 billion in 2009, should be strong enough to weather the storm even if it has to borrow more.

‘Regardless how the payments mechanically happen, BP has the financial strength to fund it,’ said Jason Gammel of Macquarie Research.

‘They have enough cash flow and quality assets that will allow it to fund that type of liability.’
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• Source(s): British Petroleum PLC


June 2010


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