Today I discussed whether BP can ever get it right in the wake of Tony Hayward’s yacht outing with John Kilduff of Round Earth Capital and CNBC hosts Trish Regan, Melissa Francis and Larry Kudlow. Here’s a transcript:
Trish Reagan: We are asking the question here, in light of all of this, can BP ever get it right? We want to go to Peter Flaherty, President of the National Legal and Policy Center also John Kilduff, Partner at Round Earth Capital and also a CNBC Contributor. Great to see you guys, John, I mean, come on, a yachting race? Is he just very, very British and I just don’t get it? Or was this a massive, massive PR blunder? Come on.
Melissa Francis: Sometimes you just have to go yachting.
John Kilduff: You could of maybe understood the World Cup. Ok, with soccer you know there is more of a common man touch there. But you know this…
Larry Kudlow: How about the President playing golf? Does that not qualify too? President Obama is out there playing golf.
John Kilduff: Larry, this guy should be on the ground twenty four seven making sure he is getting this hole plugged. Larry, this is different.
Larry Kudlow: I think it is a cheap shot, cheap shot.
Trish Reagan: Think about it he is out there on a yacht.
Melissa Francis: Yachting Larry. Yachting.
John Kilduff: He is the head of this company.
Trish Reagan: He is on a yacht while fisherman…
Larry Kudlow: Obama is golfing. Obama is golfing. I mean if we are going to go this low this low in the mud…
Trish Reagan: …while fishermen in the Gulf have lost their livelihood. I mean it just seems to be…
John Kilduff: We may lose the Gulf of Mexico as a viable ocean.
Trish Reagan: Peter, you know, aside from whether or not the guy is a PR liability, is this company ever going to get it right here?
Peter Flaherty: I don’t know. Last week I subscribed to the conventional wisdom that Tony Hayward was playing dumb before Congress for fear of criminal liability. Now I am beginning the think the guy is really pretty stupid. What is remarkable here is the disconnect between BP’s PR and its actions. This is a company that spends an enormous sum on advertising, now and before the spill. You may remember they had the Beyond Petroleum campaign.
Melissa Francis: Right. Right, yeah.
Peter Flaherty: They were trying to convince us that they were not an oil company and they had all these windmills. I would suggest instead of tilting at windmills they efficiently and safely drill petroleum and stick to their core mission and try not to pretend to be something they are not.
Melissa Francis: Yeah. John, tell me what the investment play is here. I mean, I had people over the week-end telling me that had a big short on BP. At the same time, if you looked at Barons, they were making the case for Exxon. It is down about twelve percent I think over the past fifty two weeks. It is trading at ten times twenty ten earnings. That is expensive for the group, but cheap for Exxon. What do you think is the buy here and what do you avoid?
John Kilduff: Well I think that certainly, I would avoid BP unless you have sort of the maddest of mad money that you would want to put into it for a rebound. There is better plays beyond Exxon Mobil, like Occidental Petroleum. Chevron is another one that is cheaper in relation to its peers. Because the wall of this, we are over shooting, in a way in terms of the moratorium and what this pretends for Gulf of Mexico deep water production which is necessary. This is going to drive the price of energy up which may be the end game for some of the environmentalists and others in the Administration.
Peter Flaherty: Yeah. That is why Obama should lift the moratorium. You know, they supposedly are not as adversarial as Obama would let on. There have been a series of news reports this morning about how Jamie Gorelick has been hired by BP to negotiate deals with the White House and they limited their liability of the damage of Obama’s six month drilling moratorium.
Larry Kudlow: And the Gulf shore.
Peter Flaherty: Fine. But what we really need here is for Obama to exercise some leadership and lift this darn moratorium so the whole sector doesn’t get hurt.
John Kilduff: We can’t lose this production. We absolutely can’t lose this production. That is what we are risking right now.
Larry Kudlow: What is the spill rate? It is the spill rate, stupid.
Melissa Francis: Right.
Larry Kudlow: So what is the latest update? I think that what America wants to know and what people in the Gulf want to know is when will we cap the spill rate? So they say a hundred thousand barrels might be the high end. Thirty five to sixty thousand barrels is the estimate. BP says it is recapturing twenty five thousand barrels.
Melissa Francis: If they are even saying a hundred, it has got to be a hundred.
Larry Kudlow: John Kilduff, in other words, is there any progress being made on capping the spill rate?
John Kilduff: Well, I think first of all that they have finally come clean. Given the diameter of that pipe, the hundred thousand barrels was about the number that I thought it could be. I think that no they are not capturing much oil at all. We are lucky if they are capturing fifteen thousand barrels, Larry, that would put twenty five to thirty consistently going into the Gulf every day. Until we get those relief wells, if they work, that is the only time we will see this finally end.
Trish Reagan: John you told me just a couple of weeks ago, you did not think that the company would be able to survive this. Let me ask you that question again knowing what we know now. I mean it is very much a global play. We tend to think because we are right here in the USA that this is the center of the universe, but when you look at all the endeavors it has elsewhere in the world, will this really act as a drag, enough to potentially mean that the company is not going to exist as we know it in the future?
John Kilduff: I still believe that.
Trish Reagan: Still do.
John Kilduff: I still think that is a likely outcome because again, the damage to the Gulf of Mexico, its ecosystem, is unimaginable. It is only going to get worse. As the oil heads up into estuaries, that is where the sea life, the maritime life is really going to get impacted. We are not going to believe the pictures that we see in the weeks ahead.
Larry Kudlow: Just as an aside, as Peter Flaherty mentioned, very important Jamie Gorelick, former Clinton lawyer and Defense Department and so forth. She cut a pretty good deal with the White House, Peter. She has basically taken BP out of the moratorium…
Melissa Francis: Yeah.
Larry Kudlow: …loss of jobs issue, right, and secondly taking them out of the whole restoration of the Gulf coast expense. So BP looks a little better this morning financially from that, does it not Peter?
Melissa Francis: Sooner or later they will get a new CEO.
Larry Kudlow: This is crony Capitalism at its best. These are Democratic party insiders…
Peter Flaherty: They are all making a lot of money.
Larry Kudlow: …cutting a deal with each other to help out BP, is it not?
Peter Flaherty: Yeah. The whole Democratic establishment here is making a lot of money. And you have John Podesta, the head of the Center for American Progress making these policy prescriptions that the White House adopts within twenty four hours. His brother Tony Podesta is the lobbyist for BP. What is going on here?
Larry Kudlow: Crony Capitalism. That is different from free market Capitalism. Thank you very much John Kilduff and Peter Flaherty. We appreciate it.