Friday, June 18, 2010

Deepwater Drilling to Reset

The Carlyle Group completed its Cobalt International Energy IPO prior to BP's Deepwater Horizon blowout. Its future could be in jeopardy.

Bloomberg reported:

Smaller Gulf operators, such as Cobalt International Energy Inc., may be swept up in a wave of consolidation as the regulatory landscape tilts in favor of larger firms, said William Herbert, an analyst at Houston-based Simmons & Co.

The cost of deepwater drilling may be feasible only for the biggest energy firms. Bloomberg's list included Exxon Mobil Corp., Total SA, Petroleo Brasileiro SA, Norway’s Statoil ASA and Australian miner BHP Billiton Ltd. Not mentioned were ConocoPhillips, which added significantly to its Gulf of Mexico position in 2009 or any Chinese oil companies, currently on an acquisition spree.

Bloomberg did mention Australia's BHP, the world's largest mining company, as having the horsepower to take advantage of BP's misery.

BHP is capable of spending as much as $20 billion to acquire Gulf assets, including BP project stakes that may come up for sale, Citigroup Inc. Sydney-based analyst Clarke Wilkins said in an interview today.

BHP is a joint venture partner with BP in the Gulf of Mexico, as is ConocoPhillips. The $20 billion BP Gulf of Mexico figure came up for the third time:

1. A 2007 BP America report cited the company's $20 billion investment in the Gulf of Mexico.
2. BP said it would set aside $20 billion in assets to assure its victim escrow fund.
3. BHP is capable of spending $20 billion on Gulf of Mexico assets

The Gulf of Mexico deck will be reshuffled due to BP's haplessness. William Reilly, a ConocoPhillips board member on temporary leave, may end up the de facto dealer. Reilly is co-chair of Obama's Oil Spew Commission.

BP hired The Blackstone Group, a private equity underwriter (PEU), like The Carlyle Group. One thing's for sure, PEU's will be involved.