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Finance - British Petroleum - Essay Example

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Finance - British Petroleum

There were many reasons that affected the BP share prices during beginning of 2011. The issue that had highly impacted the BP share prices was the decision taken by Transocean Ltd after conducting an internal investigation. Transocean Ltd is the world’s largest offshore drilling contractor whom the BP had contract with. They provide the most versatile fleet of mobile offshore drilling machineries to assist customers find and utilise efficiently oil and natural gas reserves. Transocean Ltd announced on June 22, 2011 the release of an internal investigation report illustrating the reasons behind the explosion on the Deepwater Horizon rig on April 20, 2010. Transocean operated and owned the Deepwater Horizon rig that was drilling on the oil well in the Gulf of Mexico and their report had an impact on the BP prices the following weeks. In the opinion of Transocean, HP was to be held accountable for the disaster at the rigs as HP was controlling the drilling process at the oil well. The report explains that some of the inaccurate decisions made by HP resulted in the massive explosion on the oil well. According to the findings of the report the reason behind the explosion was the preparing a wrong design of the well, which was carried out by BP, together with an ineffective cement program. The guardian reports this; “the explosion and the oil spill was the result of a succession of well design, construction, and temporary abandonment decisions that compromised the integrity of the well and compounded the risk of its failure; the Swiss firm, Transocean Ltd, also said that many of the decisions were made by well owner BP in the two weeks before the incident” (The Guardian, 2011). Lacombe (2011) said that the report of Transocean can affect the BP share prices as it indicated that the decisions of BP included narrowing of the geological window in order to keep the drilling safe. Moreover, at the end of the week the BP share prices had declined to around 437.15p (Yahoo Finance, 2011). However, after the sudden decline in the BP share price due to the Transocean report, the company was seen prospering in the market. Weatherford International was the first contractor whom the British Petroleum had been in association with at the Macondo oil well, and the business association continued for quite a long time. And when the financial management of the Weatherford International had taken the decision to clear all the settlement claims with the British Petroleum, the decision created a great effect on the PB share prices. In fact, Weatherford International was the first contractor whom the company was intending to make settlement with, and it was of great significance as the settlement process was moving forward and would potentially create a positive effect on BP share prices. Moreover, the financial management of the company decided to clear all its association at the Macondo oil well which has been the prime target at the oil spill at the Gulf of Mexico during last year. As Lacombe (2011), points out, when the good news about the Weatherford International’s settlement with British Petroleum at Macondo oil well was spread around, the BP share prices increased by 16.1p and was closed at 445.7p. Apart form these, Mitsui of Japan, one of the minority partners of the BP Company at the oil well, also made the decision to settle its claims with the company soon after the Weatherford I ...Show more

Summary

British Petroleum British Petroleum (BP) is one of the world’s leading international oil and gas companies that operates and markets products in more than 80 countries, providing its customers with fuel for transportation, energy for heat and light, retail services and petrochemical products for day-to-day activities (Bp.com n.d)…
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