Gulf Dies While BP 'Financially Manages' the Disaster

DALLAS, July 6, 2010 - "Financial preservation rules BP's cleanup strategy," said Fred McCallister, an investment banker with Allegiance Capital Corporation, in comments prior to his testimony Wednesday before the U.S. Senate Committee on Commerce, Science and Transportation. McCallister spoke regarding the red tape he's encountered in trying to bring European oil skimming vessels to aid Gulf States cleanup efforts.

"The problem is larger than BP," said McCallister. "If BP spared no expense to deploy all available assets, it would impair BP's financial health. BP's first obligation is to its shareholders and by stretching the expenditures out the company can limit harm and liability."
Lawsuits take many years to adjudicate in the courts. Lawsuits from the Exxon Valdez oil spill were pending 20 years after the break up of the ship.

McCallister added, "As an investment banker, I spend a great deal of my time advising firms on how to maintain or improve their financial health. It's clear to me that spreading costs out over many years is BP's key to surviving the costs of the disaster in the Gulf. It's like this: spend whatever money you have today to cap the well and solve that problem. Then in a measured and judicious way you can work on the cleanup even if it takes several years."

McCallister believes that financial survival is dictating BP's strategy of dispersing and submerging the oil rather than surfacing, collecting and removing it. Large quantities of dispersants, close to one million gallons now, are being used to break the oil up and hide the problem. "That may be why we don't see BP conducting a no-holds-barred effort to bring all available skimmers to the Gulf," he said.

Unfortunately, what's best for BP is not best for the environment or the livelihood of the people who live in the Gulf, from McCallister's point of view.

"This toxic brew of oil, methane and dispersants can do environmental damage to the Gulf that may forever change it and the livelihoods of the people who depend on it," McCallister said. "What value do you put on the environment and the people who are the victims?"
"This is a major disaster that has to be dealt with as if the country is going to war. Many are using this terminology – including the President – but no one is backing it up with action," said McCallister. "We live in a global society, and we should use the best assets available on a global basis. There have been oil spills all over the world. We can benefit from the global base of knowledge and equipment available to help deal with these types of disasters."

"I understand BP's desire to mitigate expenses as much as possible and preserve the health of the corporation; but the bigger issue is resolving the problem at hand intelligently and quickly," said McCallister. "BP is the largest corporation in the UK and likely fits the 'too big to fail' description. Perhaps the British government should make BP a loan just like the U.S. has helped bail out its corporations, GM for example. We form governments to deal with this type of situation that goes beyond the scope of one business. Government needs to rise to the occasion so cleanup efforts aren't based on BP's interests but are rather based on the greater good. At the very least, BP should not be running the show due to a conflict of interest."

He concluded, "BP's financial viability is important, but it's not more important than what's happening in the Gulf of Mexico."