"If BP files for Chapter 11, RIG can't count on that $20 billion in escrow fund, which is reserved for victims' claims. More importantly, that fund is secured by BP's U.S. assets and will receive quarterly payments. It doesn't cap BP's liabilities, but it does reduce its net asset value. If BP files, RIG and others will be down at least that much in claims coverage."
I'm betting that the world can't afford the price of oil if we allow one of these companies to fail. The cost of drilling for new oil would be astronomical. Imagine a company trying to insure drilling operations after BP gets forced into bankruptcy? What insurance company is going to assume total liability then?
Naw...sadly this will be pushed out of the publics perception and then sigh...business will be back to usually. Our world is built on oil.
Sounds rather like the Bear Stearns and Lehman arguments as to why they wouldnt fail.
Anyways...we can speculate all we want. The market will tell us what it believes in very short order.
Time to take a side. Make sure you are on the right one. The wrong one will not result in a loss, it will result in the complete devastation of your portfolio.
Williams should have done his homework before he vented his opinion. First, he should read the BP-RIG contract agreement. He might then revise the article slant. Then, he ought to look at who made the drill decisions, who ignored whose advice, who directed operations and shouldered responsibility, and then there's the stubborn BP self-insurance issue. If you were driving without insurance and had a serious accident, wouldn't you look blame everyone around to insulate yourself from financial damages? This is more like Desi looking at Lucy and saying, "Luuuucccyy, you've got some splaining to do!" And RIG ain't in that conversation.
moronic article rig is NOT next in line after BP it's anadarko and mitsui they all have to go belly up before u start trying to move down the food chain! And I gurantee they will not just roll over and play dead signing a blank check like those pu$$y's at BP!
There are so many unsubstantiated statements in the article to make a clearly biased and completely erroneous piece of pulp fiction.
A complete joke not worth commenting on today with so much testimony available.
Your living in a dream world. Should the US moratorium on drilling be made permanent, Transocean will move its drilling platforms to other countries.
If you would've take the time to research the matter, you would know that President Bush actually signed treaty with Mexico, and 2/3 of the Gulf of Mexico is controlled by Mexico not the US.
So how hard do you think it will be for Transocean to move it's rigs a few hundred miles to start drilling in the Gulf of Mexico waters controlled by Mexico. The answer if your dense is about 1 to 2 days.
I'm not sure if RIG will hit 60 + per share on Monday, but I do believe it is the best investment available to us commoners at this point in time.
With 10 + investment news letters recommending it right now, and with BP contractually obligated to pick up all clean up cost, RIG is a very good investment.
Do you really think this post will save your short position in rig?
Let's face it, BP not RIG is responsible for the gulf Oil spill. The only way RIG will get hung with any liability will be if BP goes bankrupt. And if you think BP will go bankrupt think again, as BP's biggest Customer is the US military.
No this whole matter is really laughable. The President of the United States demands BP set up an escrow account for 20 billion dollars 5 billion over 4 years. Of course BP did this, as this is only 16% of their annual profits / free cash. And we all know that the rest of the damages and claims against BP will be tied up in the US justice system for at least a decade (10 years).
No my friend your short position in RIG is a total loss, as this stock is on the fast track to $60 a share.
That was a really stupid article.
1) BP won't go bankrupt
2) Everyone knows BOP's have had problems in the past its a well known issue the MMS wrote a report on it. Just because RIG knew BOP's can post a problem doesn't mean anything as everyone knew that.
3) The article is written by a child he is an idiot
Actually the more burdened BP is to pay claims the more likely it will file BK. The Anadarko news should have caused rig shares to go down with rig being next in line for compensation claims.
Out of Its Depth
ByGlenn Williams, RealMoney Contributor , On Friday June 18, 2010, 1:20 pm PDT
As the dominant deepwater exploration and drilling company working in some of the most hostile environments on earth, Transocean has always managed to live up to its motto: "We're never out of our depth."
It might want to revise that.
For a company that has always projected competence, efficiency and raw power, RIG's latest problems are a huge blow to its reputation, but the bigger question is its exposure to the Gulf disaster. The unavoidable conclusion for anyone even remotely considering touching its stock with a 100-foot pole: RIG's future is hopelessly tied to BP, and we all know BP's fate is anchored to a gushing oil well at the bottom of the Gulf of Mexico.
But the fact is: RIG was the company that drilled the failed well. Yes, RIG was BP's contractor, but RIG was the party that actually caused the blowout. Also true: Its contract provides broad indemnity against pollution and contamination liabilities. But that indemnity assumes BP doesn't go under. There are many analysts who believe BP will have no choice but to file for bankruptcy-court protection as the damages mount. Indeed, some estimates project liabilities north of $50 billion.
If BP files for Chapter 11, RIG can't count on that $20 billion in escrow fund, which is reserved for victims' claims. More importantly, that fund is secured by BP's U.S. assets and will receive quarterly payments. It doesn't cap BP's liabilities, but it does reduce its net asset value. If BP files, RIG and others will be down at least that much in claims coverage.
There are a lot of players involved with Macondo. BP served as the operator and holds a 65% interest; Anadarko Petroleum holds a 25% stake; and a Japanese partner tied to Mitsui holds the remaining 10%. Anadarko argues it has no liability since it was a passive investor. If BP files for bankruptcy, RIG would become the next best big target for the disaster.
Some may argue RIG isn't at fault. It was simply following orders from BP. That probably won't fly. RIG knew the risks -- perhaps better than anyone -- witnessed the problems and continued to drill. It could have walked away several times, but chose to continue. Congressional records show RIG and BP battled over the Macondo well as early as February, more than two months before the explosion that killed 11 workers on the rig and released an untold, and so far unstemmed, torrent of oil into the Gulf of Mexico.
Records also show RIG took 10 days to plug the first cracks. Nevertheless, after plugging those cracks, both RIG and BP continued with the drilling, even though those cracks complicated the operation in the ensuing weeks.
Worse, according to Reuters, the U.K.'s safety regulator, the Health and Safety Executive, warned RIG about violations related to the blow-out preventer equipment. Apparently, RIG knew about similar BOP equipment failures that caused other accidents in 2005 and 2006. RIG appears to have been a full and willing partner with BP. Both knew about and accepted the substantial risks involved with this drilling project.
Isn't RIG in a similar position as Halliburton? Actually, no. While HAL was involved in the Macondo project, it wasn't the driller. In fact, it advised against proceeding, and its role was minimal. HAL may snag a few lawsuits, but it also may generally get a pass. RIG is unlikely to be so lucky.
Fitch Ratings seems to concur. The credit-rating agency recently cut RIG's ratings to "negative" from "stable," citing the uncertainties related to the rising cost estimates and increased political heat. Yet Fitch affirmed its investment-grade ratings for HAL, saying it doesn't expect the oil-services contractor to be exposed to the costs associated with the spill.
Investors have also voted with their feet, an exodus that has sheared RIG shares from $92.03 in April, prior to the accident, to around $50 today. Worse yet, its earnings are in jeopardy from the U.S. drilling moratorium, which will continue for months. Even after the moratorium is lifted, the entire industry will be subject to more stringent regulation.
But it isn't just the Gulf or the U.S. Other countries also are examining their drilling operations and regulation, they may impose similar moratoriums to assure safety from similar blowouts. Earnings will be bleak, not only for RIG, but its competition: Noble Corp., Diamond Offshore Drilling, Ensco, and Pride International.
Until Macondo is capped and the cleanup costs understood, nothing good will happen to RIG or BP. And here is the real rub: Will Macondo be capped? Some are now arguing that the relief well BP is drilling now may not work, and capping the well could take many more months. Every day, the costs will rise, and so will the uncertainty factor for RIG, a company that couldn't possibly be any more out of its depth right now.