UPDATE: Mitsui & Co Braces For Gulf Of Mexico Oil Leak Costs
May 31 2010 - 5:59AM
Dow Jones News
Japanese trading company Mitsui & Co. Ltd (8031.TO) said
Monday it expects to shoulder part of the costs stemming from the
massive oil spill in the U.S. Gulf of Mexico, although it is
difficult at this point to be specific on numbers.
"We will have to carry part of it as a stake holder," said a
spokesman of Mitsui & Co. "But specifics like the percentage
and the total amount are unclear" because there are parties
involved who are not shareholders (in the leaking well) and as the
leak is still ongoing, he noted.
The official was responding to questions about the failure of
oil field operator BP PLC's (BP) weekend efforts to plug the
estimated 12,000 to 19,000 barrels a day of crude oil spewing into
the Gulf of Mexico from a broken pipe 1,500 meters under the
water.
The Japanese trading company's unit Mitsui Oil Exploration Co.
has a 10% stake in the offshore oil block from which the oil is
leaking. Mitsui & Co has diversified interests in oil and gas,
metals, power generation, chemicals and transport.
U.S. oil company Anadarko Petroleum Corp. (APC) has a 25% stake
in the Gulf of Mexico block.
Other companies, including oil field rig operator Transocean
Ltd. (RIG) and oil field services company Halliburton Co. (HAL),
which performed cementing work on the well which ruptured April 20,
have also been collaborating in efforts to contain the flow and to
find out what happened.
The Tokyo-based company hasn't been having a good time
recently--on May 7 it said its net profit slid to Y149.72 billion
from Y177.61 billion a year earlier, while revenue sagged 29% to
Y9.358 trillion from Y13.125 trillion, although at the time it
forecast a sharp recovery in net profits and revenues for the
current year.
The company's share price hasn't been hard hit, though--in the
past three weeks its share price has fallen 3.9% while the wider
Nikkei 225 index has dropped 8.7%.
On Sunday, BP said it would try to contain the oil flow with a
new type of cap that would siphon oil to the surface rather than by
plugging the well, but the operation could initially increase flows
and had never been tried before in such deep water.
Mitsui Oil Exploration has not sent staff to the disaster area,
but it is ready to do so upon request, the Mitsui & Co.
spokesman said.
Mitsui Oil Exploration insurance contracts may cover the spill
and collateral damage to third parties to a maximum of $45 million,
the Mitsui & Co. spokesman said.
"This will definitely be one of the worst oil spill cases known
in the industry's history," said Hidetoshi Shioda, analyst with
Mizuho Securities Co.
It may take years to settle the total cost, including
compensation to industries like fisheries and tourism, and to work
out how to divide the costs, Shioda noted.
"It is likely that Mitsui & Co. will build reserves for
future costs in this fiscal year's earnings" started in April, and
book these as an extraordinary item, Shioda added.
Mitsui & Co. holds 70% of Mitsui Oil Exploration, while
Japan's Ministry of Economy, Trade and Industry owns 20%. The
reminder is held by several other Japanese companies.
The company's oil exploration and production business is focused
mainly in the Middle East, South East Asia and Australia.
-By Mari Iwata, Dow Jones Newswires; 813-6269-2798;
mari.iwata@dowjones.com
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