Old Conoco pump
ConocoPhillips will face a lawsuit from the China State Oceanic Administration (SOA) for the oil leak in platform B and C of the Penglai 19-3 oil field. [1] The leak, which started in June, is estimated to have caused 2,500 barrels of oil and mud to be released in the sea and polluted 840 square kilometers of water. [2]
According to the Chinese administration, ConocoPhillips has to date been unable to seal off the source of the leaks. However, the event has not caused any perceptible difference to the company’s stock which is presently trading at a 20% discount to our $80 price estimate for Conoco.
The soon to be split ConocoPhillips competes with vertically integrated oil majors such as Exxon Mobil, Chevron, BP, Royal Dutch Shell and independent exploration firms such as Anadarko Petroleum.
The spill is not that big, but production is hurt
The Penglai 19-3 field is the largest offshore oil field in China. [2] ConocoPhillips owns a 49% stake in the field and is the operating partner while the rest of the stake is held by Chinese CNOOC Ltd. [3] While the spill is quite minor in comparison to the BP Gulf of Mexico disaster, the Chinese Administration has been frustrated by the company’s response to the situation.
In a statement, the SOA criticized the measures taken by Conoco as ‘temporary and remedial’ while asking for a complete assessment of the situation and the elimination of further spills. [2] The company has deployed more than 900 personnel and 33 boats in response to the event. It has also pushed into service 67 divers to gather oil-based drilling mud from the sea bed using vacuum technology. [4]
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