BP (BP) used a cheaper and riskier well design in more than one-third of its deepwater wells drilled in the Gulf of Mexico -- a significantly higher proportion than most other big drillers in the area, according to The Wall Street Journal. The same problematic design, known as "long strong," was used in BP's Deepwater Horizon rig, which exploded on Apr. 20, killing 11 workers and causing the worst offshore oil spill in U.S. history.
The alternative major well design, called "liner tieback," is pricier and safer because it includes more protections against the sort of natural gas blowout that destroyed the Deepwater Horizon, says the Journal. The paper had analyzed records provided by the Minerals Management Service.
BP used the cheaper design on 35% of its deepwater wells since July 2003, the earliest date well-design data was available. "Long strong" design has been called "risky" by Congressional investigators.
Interestingly, Anadarko Petroleum (APC), a minority partner in Deepwater Horizon, used "long strong" design on "42% of its deepwater Gulf wells, though it says it doesn't do so in wells of the type drilled by BP," according to the Journal. Anadarko has pinned full blame for the Gulf oil spill on BP. Moody's has downgraded the company's long-term debt to junk status (Ba1).
The Journal notes: "Both companies used the design much more often, on average, than other major Gulf drillers."
Raising Funds for Cleanup
Meanwhile, BP is trying to raise money for the $20 billion oil spill cleanup fund President Barack Obama has demanded it set up to handle claims from the disaster. It has approached seven major banks for loans of $1 billion each, according to Reuters. The banks include Barclays, HSBC and Royal Bank of Scotland.
Apart from the loans, the Reuters report notes: "BP said in an investor call on June 4 that it had $5 billion of cash, in addition to $5.25 billion of undrawn committed bank lines, and $5.25 billion of committed stand-by bank lines."
What is Short Selling?
Make a profit when stocks prices fall.View Course »