This Day On The Street
Continue to site
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

BP Returns From Exile, Wins Gulf Bids

Since the unfortunate disaster, BP has not only lost billions in potential revenue, its shares also tanked. Since April 2010, when the Horizon disaster was first reported, BP's shares dropped 21% in New York. On the other hand, two of BP's biggest competitors in the Gulf of Mexico, Chevron (CVX) and Royal Dutch Shell (RDS.A), have risen by 43% and 17% respectively in the same period.

The lifting of the ban came at a good time. The oil giant, which was kept away from the three previous lease auctions due to the ban, participated in the latest sale held on Wednesday. The company submitted 31 bids for drilling leases in the central Gulf and ended up winning 24 bids valued at $41.6 million. Interestingly, some of the acreage it has acquired lies in the Mississippi Canyon leasing area, which is close to its Macondo well, the epicenter of the oil spill.

With the ban lifted, the company could once again start getting these valuable contracts worth billions. It has already acquired attractive acreage which, in the long term, could give a boost to BP's production. Therefore, the company's new agreement with the EPA could be a game changer.

Moreover, BP is currently working on a way to bypass the 40-year-old crude export ban. The company has partnered with Kinder Morgan Energy (KMP) whereby the former has acquired around 80% capacity of the latter's $360 million mini-refinery in Houston. The facility, which opens in July, will be able to process 100,000 barrels of oil daily. All BP has to do is slightly shuffle the hydrocarbons so that they are considered processed, and then they can be exported.

Other refiners, such as Valero (VLO) and Phillips 66 (PSX), are also constructing mini-refineries which can also be used by other larger oil firms to bypass the crude export ban. If other oil companies also start to follow in BP's footsteps then the crude export ban would become rather meaningless for the oil majors.

For BP, these positive developments come just weeks after the company reported its quarterly results that were in line with estimates. For the fourth quarter, the company's profits dropped 27% year-over-year to $2.81 billion, which matched analysts' estimates as per data compiled by Bloomberg.

The decline came on the back of asset sales, weak refining margins, higher depreciation expenses and some big exploration write-offs. The company's daily production (excluding from Russia) dropped 1.9% to 2.246 million barrels of oil equivalents, but underlying output rose 3.7%, which was encouraging.

The spill's compensations, fines, clean-ups and legal costs increased to a massive $42.7 billion in 2013, from $42.5 billion in 2012. In the fourth quarter, the company spent $119 million as expenditure related to the Gulf of Mexico disaster.

At the time of publication, the author held no positions in any of the stocks mentioned.

This article represents the opinion of a contributor and not necessarily that of TheStreet or its editorial staff.

2 of 2

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
Only $9.95
14-Days Free
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
SYM TRADE IT LAST %CHG
BP $41.97 -1.20%
AAPL $132.83 0.22%
FB $80.60 0.07%
GOOG $540.11 0.00%
TSLA $247.75 0.01%

Markets

DOW 18,232.02 -53.72 -0.29%
S&P 500 2,126.06 -4.76 -0.22%
NASDAQ 5,089.3620 -1.4320 -0.03%

Partners Compare Online Brokers

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs