Oil company buyers and sellers in the deepwater Gulf of Mexico after BP
$20 billion is a chunk of change even for BP (BP).
You can bet that a lot of oil company CEOs are trying to figure out if they can afford to keep drilling in the Gulf of Mexico (whenever that’s possible again.)
If the $20 billion fund that BP has agreed to put aside for the Deepwater Horizon disaster is the new size of an oil company’s potential minimum liability for a spill in the Gulf, you can bet that a lot of those CEOs are going to decide they can’t play.
And that becomes even more likely now that insurers are cutting back on their coverage for spills in Gulf waters. In written testimony John Lloyd, chief executive of Lloyd & Partners, told the U.S. Senate on May 11 that available insurance coverage could drop by as much as 30%. Premiums have already climbed by 50% for deep water rigs.
That’s likely to leave some oil companies faced with an alternative of coughing up extra cash for insurance (if they can get it), self-insuring (if they can afford it), or selling out of drilling leases and projects (if they can find a buyer).
But there will be winners from these decisions. Read more
Update Energy Transfer Partners (ETP)
I’m filing this update from the beach. I’m on vacation the week of March 29 April 2. Unless the sun stops shining here in the Bahamas (or the kids decide to hire themselves out on a fishing boat), I don’t anticipate filing more than once a day for this week. JubakPicks.com will go back to its normal schedule on Monday April 5.
Update Energy Transfer Partners (ETP)
Energy Transfer Partners (ETP) has hit my $47 target price just about on schedule. But I don’t see any reason to sell these master limited partnership units out of Jubak’s Picks quite yet. As I wrote in July 2009, “The longer the Federal Reserve promises to keep interest rates low, the more valuable Energy Transfer Partners (ETP) is and the longer I want to hold it.” The Fed’s target for shorter interest rates is still at 0% to 0.25% and the promise is still to keep rates at that level “for an extended period.” Long-term interest rates have begun to push upward in anticipation of an eventual change in Fed policy, or inflation, or the depreciation of the dollar, or whatever, but the 7.84% yield on these units is still comfortably ahead of that increase. (For more on Federal Reserve policy see my post http://jubakpicks.com/2010/03/16/fed-holds-interest-rates-near-0-but-continues-to-reduce-role-in-the-markets/ )
So what’s ahead for Energy Transfer Partners? Read more
