BP, Oil-Spill Stocks: The Day of Reckoning - TheStreet

BP, Oil-Spill Stocks: The Day of Reckoning

BP and its oil company peers face the Senate firing line on Tuesday, but it is only BP stock that ends trading down on Tuesday as the oil companies pass the blame around like a hot potato.
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SAN JOSE, Calif. (

TheStreet

) -- As Tuesday's Senate hearing into the oil spill in the Gulf of Mexico proceeded,

BP

(BP) - Get Report

shares were the only shares among those of the oil companies testifying that traded down.

It's far from a scientific law or financial algorithm that dictates the correlation between stock performance and the performance of top executives facing a verbal grilling from the U.S. Senate.

Nevertheless, at least for a day, as the never-ending blame game among the oil companies played out in the Senate, shares of

Transocean

(RIG) - Get Report

and

Halliburton

(HAL) - Get Report

finished trading positive. Transocean shares were up 3.8% at the end of Tuesday trading, while Halliburton shares finished the day up 2.7%.

Cameron International

(CAM)

, the manufacturer of the blowout preventer that has been front and center in the oil-spill investigation, and the chief piece of equipment in BP's assigning of blame, also finished Tuesday in positive territory, up by 3%.

BP shares were down, albeit marginally, at the end of trading on Tuesday.

If there is to be any correlation between the performance of stocks as their top executives faced the firing line in Washington D.C., it certainly did not seem to matter how the politicians rated the CEO performance. After the Senate hearing on Tuesday, Senator Jeff Sessions (R-Ala.) told the

Wall Street Journal

that the oil executives' responses were "disappointing" and lacked "candor."

During the Senate hearing, a frustrated Republican Senator, Lisa Murkowski of Alaska, said that if the oil companies can't restore confidence in their operations offshore, "The incident will impact the development of energy policy for our country." The Alaskan Senator added in a rhetorical flourish that if confidence is not restored, "not only will BP not be out there, the Transcoeans won't be out there to drill the rigs and the Halliburtons won't be out there cementing."

Of course, as a Republican Senator from the great state of Alaska -- where each resident receives an oil profit dividend check each year -- Murkowski is no foe of offshore drilling, in general.

And late on Tuesday, the

New York Times

reported that the climate bill that the Senate is set to unveil on Wednesday would include modified support for offshore drilling.

More on the BP Oil Spill

Oil Spill Impact: Photo Gallery

One near-scientific law again found support during Tuesday's Senate hearing: the oil companies will continue to methodically blame each other for the massive oil spill.

BP America President Lamar McKay, not surprisingly, continued to focus on the blowout preventer's failure. "The systems are intended to fail-close and be fail-safe.... Sadly and for reasons we do not yet understand, in this case, they were not," the BP executive said during his testimony.

Transocean chief executive Steven Newman categorically denied the BP spill story, saying that the blowout preventer was "clearly not the root cause of the explosion.... The attention now being given to the

blowout preventers in this case is somewhat ironic because at the time of the explosion the drilling process was completed," the Transocean chief executive said.

Transocean didn't just point the finger at BP, but tried to focus the Senate on work done by Halliburton in cementing the underwater well. The Transocean CEO said, "The one thing we know with certainty is that on the evening of April 20 there was a sudden, catastrophic failure of the cement, the casing, or both."

The Transocean CEO noted that "the cementing sub-contractor is responsible for encasing the well in cement, for putting a temporary cement plug in the top of the well, and for ensuring the integrity of the cement."

Transocean also stressed that even though Transocean operated the oil rig, BP, as the lease owner, was involved in critical decisions as to operations.

In an expected rebuttal, BP's McKay said that Transocean, as operator of the well, was responsible for its safety, and that certain control indicators could have been analyzed to tip Transocean off to any instability in the well before the blowout.

A point of controversy during the Senate hearing was the decision to not have Halliburton place a final cement plug within the well before removing what is known as drilling mud. A cement plug prevents explosive gas from escaping and traveling to the rig on the surface.

Halliburton's president Tim Probert said while these cement plugs are normally put in place before drilling mud is removed, in this case drilling mud had been removed before installing the final cement plug.

The

Wall Street Journal

on Tuesday cited a worker on the rig at the time of the explosion as saying that Halliburton was getting ready to set a final cement plug when workers received other instructions. The oil rig worker said that BP asked permission from the federal Minerals Management Service (MMS) to displace the mud before the final plugging operation.

Halliburton's Probert said that his company "is contractually bound to comply with the well owner's instructions on all matters relating to the performance of all work-related activities."

BP's McKay said he had not read the

WSJ

article and was not "familiar with the procedure on that particular well."

Teaming up to point the finger for a moment, Halliburton's Probert and Transocean's CEO Newman said any discussion with the MMS would have involved BP.

Just how much BP will have to pay in the end was also a point harped on by Democratic Senator Maria Cantwell of Washington. However, BP's McKay did not provide a firm answer. The BP executive said BP will pay all legitimate claims related to long-term impacts on shipping and fishing industries and tourism, but wasn't willing to be more specific.

An analyst with Wall Street securities firm

Sanford. C Bernstein

has estimated the total cost to BP of the oil spill containment and cleanup at $13 billion.

Senator Bob Menendez (D-N.J.) had the zinger of the day, telling the oil executives, "I think it doesn't take a rocket scientist to figure out that there is no such thing as 'too safe to spill.'"

Ultimately, by the end of a day of Senate grilling, the oil executives weren't "spilling" nearly enough words, in the good Senators' opinions, to reach resolution on the actual oil spill. And the oil companies certainly did not seem safe from further attacks from politicians.

-- Reported by Eric Rosenbaum in New York.

RELATED STORIES:

>>Oil Spill in Pictures: Gulf of Mexico Impact

>>Can BP Avert an Exxon Valdez-Like Disaster?

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