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Leaked email from Cameron CEO Jack B. Moore: Deepwater Horizon

From: Harrell, Rosemary On Behalf Of Moore, Jack B
Sent: 20 April 2011 16:05
Subject: Letter from Jack Moore
Importance: High

April 20, 2011

Dear Fellow Employees,

A year ago today a tragic accident on the Deepwater Horizon took the lives of 11 men and injured many others.

One year later, our industry still mourns the loss of Jason Anderson, Dale Burkeen, Donald Clark, Stephen Curtis, Gordon Jones, Roy Wyatt Kemp, Karl Kleppinger, Blair Manuel, Dewey Revette, Shane Roshto and Adam Weise. Examination of the causes and consequences of the accident continues, as does the evaluation of its ongoing impact on the energy industry and our national economy.

I want to take this opportunity to once again acknowledge and thank those of you who gave so freely of your time and talents to help design and construct solutions to contain and ultimately shut in the Macondo well.

Recent events all over the world remind us of the crucial role that energy plays in our day-to-day lives. Unrest in Egypt, Libya, Syria and other countries has contributed to oil prices exceeding $100 a barrel and gas prices topping $4 a gallon, while the earthquake and tsunami in Japan became a major energy issue when the Fukushima nuclear plant was affected.

As we watch these events unfold, we need to heed their warnings: We simply have to make the U.S. more energy-secure, both by ensuring the safety of our existing energy infrastructure and by reducing our dependence on foreign oil supplies.

While the Macondo spill was an event that never should have happened, it does not represent an insurmountable technical challenge that should shut down oil and natural gas drilling. The U.S. has not elected to shut down the nuclear industry in the wake of the disaster in Japan, just as we do not shut down the airline industry after a crash.

This country needs the energy resources that can be safely developed offshore. We’ve safely drilled more than 50,000 wells in the Gulf over the years. We know the processes and procedures to follow, and the lessons learned from Macondo will make drilling even safer. The memory of those who were lost on the Macondo well remains a stark reminder that safety is priority one as we continue to explore and develop offshore oil and natural gas.

Thank you for your continued dedication in making Cameron a leader in this endeavor.

Best regards,

Jack B. Moore
President & CEO

1333 W. Loop S., Suite 1700
Houston, TX 77027
Phone: 713-513-3452
Fax: 713-513-3455

Related article published today:

BP’s Gulf of Mexico oil spill bill could hit $60bn, Moody’s warns

The final cost to BP from the Gulf of Mexico oil spill is likely to “remain uncertain for years to come” and could reach $60bn (£37bn), according to new analysis from Moody’s, the rating agency.

It is now a year to the day since the Deepwater Horizon rig exploded and sunk, killing 11 men Photo: AP

By Rowena Mason, Energy Correspondent 5:30AM BST 20 Apr 2011

BP is budgeting for maximum final costs of $41bn to settle fines, compensation and clean-up operations, based on the assumption that it will not be found guilty of any allegations of gross negligence.

However, estimates from Moody’s say the figure could be much higher, with BP’s estimate of the cost at the very bottom end of expectations.

“We still do not know the total cost and penalties from the spill, but our analysis suggested the figure would be roughly $40bn-$60bn,” Moody’s analysts said.

It is now a year to the day since the Deepwater Horizon rig exploded and sank, killing 11 men. Moody’s points out it will take until late 2012 to get any legal outcomes that determine the size of fines for BP.

The rating agency believes that BP can still afford to pay liabilities of $60bn, based on the fact that it has more than $30bn of free cash flow and is disposing of $30bn in assets. It said BP’s A2 credit rating is not likely to suffer.

It is, however, sceptical about whether BP will share the burden of fines among all its contractors. Despite official reports spreading blame for the accident among multiple parties, Moody’s expects Halliburton and Cameron will escape hefty penalties. The White House Oil Spill Commission found Halliburton’s cement job on the well was not secure. Cameron made the blow-out preventer that failed to stop the explosion. Both deny any wrongdoing.

Moody’s analysts said: “A quick look at the five Macondo companies in the year since the accident reveals that legal matters remain far from certain for BP, Anadarko and Transocean, but at this point, we expect little long-term financial fallout for Halliburton or Cameron.”

A spokesman for BP pointed to the basis for its provisions in the company’s annual report.

He said: “What we have said before is that the provisions we have made in our accounts have been made on the basis that we are not guilty of gross negligence. We also believe there is still uncertainty in the flow rate, on which certain fines and penalties will be based.”

Detailed information about BP’s projected liabilities for the oil spill only emerged in its annual report, after the US Securities and Exchange Commission wrote twice to the company demanding more information.

Following the letters, BP disclosed a detailed breakdown of what it expects the $41bn to be spent on, including:

• About $3.5bn for fines under the Clean Water Act. Under this law, penalties can be higher if charges of gross negligence are brought. BP also disputes the official US estimates that 4.9m barrels of oil may have been spilt and used an estimate of 3.2m barrels when calculating its potential liability.

• Just over $15bn for charges related to litigation and claims, including items be paid out under the official compensation fund.

• More than $7bn related to any additional amount that needs to be taken out of the official $20bn compensation fund beyond the expected $13bn in claims.

• Charges related to the oil spill response of $13bn.

BP says the $41bn provision does not reflect any potential fines and penalties except for those relating to the Clean Water Act, as “it is not possible to estimate reliably either the amount or timing of such additional items”.

In its correspondence with the SEC, BP’s finance director Byron Grote said the company “agreed to change or supplement the disclosure in our future filings”, but “not because we believe our prior filing is materially deficient or inaccurate.”

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