This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Cramer's Action Alerts PLUS - See his portfolio and get alerts BEFORE every trade. Learn more NOW!

Gulf Leak Estimates Return to Haunt BP

NEW YORK ( Trefis) -- Oil major BP (BP) may face a federal investigation on whether company officials deliberately lied to the government about estimates relating to the size of the Gulf of Mexico spill.

According to sources quoted by the Wall Street Journal, investigators are looking into statements made by BP's executives, trying to see if they provided the best estimates regarding the rate at which oil was leaking from the well.

BP disputes official estimates regarding the overall size of the leak, which will be crucial in deciding the penalty imposed on it based on the Clean Water Act. The oil major has already agreed to pay out billions of dollars in damages related to the incident and facing billions more in federal penalties in the future.

We have a $57.72 price estimate for BP, which is at a 50% premium to its current market price.

Oil spill expenses

According to the Federal Clean Water act, BP can be fined a maximum of $1,100 per barrel for the oil that leaked as a result of the May 2010 accident. In case of gross negligence the penalty can be as high as $4,300 per barrel.

BP disputes the government estimate that the rate of flow from the well was between 53,000 to 62,000 barrels per day, and calculates its estimate of the potential liability under the Clean Water's Act to be around $3.5 billion, assuming a flow rate of around 47,500 barrels a day.

Federal investigators are now looking whether BP withheld information during the first week of the spill. Already, prosecutors have indited one of BP's engineers for deleting messages that claimed that BP was understating the size of the leak.

Initial estimates of the leak varied widely from an 8,000 barrels/day according to the Coast Guard to a worst-case estimate saying the size of the leak could be between 64,000 to 110,000 barrels/day. The variation was explained because of the difficulty in estimating the flow of oil from a leak thousands of feet below sea level.

Observers say that despite the investigations, prosecutors will find it difficult to build a case against BP for withholding data because of the scale and the depth of cooperation between the company and government agencies during the operation to plug the leak.

Like our charts? Embed them in your own posts using the Trefis Wordpress Plugin.

This commentary comes from an independent investor or market observer as part of TheStreet guest contributor program. The views expressed are those of the author and do not necessarily represent the views of TheStreet or its management.

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Try it NOW
Only $9.95
Try it NOW
14-Days Free
Try it NOW

Check Out Our Best Services for Investors

Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
Try it NOW
Try it NOW
Try it NOW
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
SYM TRADE IT LAST %CHG
AAPL $129.09 0.49%
FB $79.74 0.98%
GOOG $571.00 2.30%
TSLA $197.32 -2.96%
YHOO $44.10 -0.41%

Markets

DOW 18,288.63 +155.93 0.86%
S&P 500 2,117.39 +12.89 0.61%
NASDAQ 5,008.0960 +44.5690 0.90%

Partners Compare Online Brokers

Free Reports

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs