Aftermath spawning profits for many contractors
Saturday, June 12, 2010
If anyone is winning in the Gulf of Mexico, it may be the vast web of businesses getting a surge of work containing and cleaning up BP's oil spill.
Hundreds of contractors and subcontractors are doing jobs both complex and mundane, whether it's building the robots that BP sends 5,000 feet underwater to capture live video of the broken wellhead or providing boats to skim oil from the water's surface. And then there is the cottage industry that has sprung up overnight to support the 24,600 cleanup workers, catering their meals, hauling away their trash and supplying portable toilets.
"There's money flowing in the streets," said Michael E. Hoffman, director of research at Wunderlich Securities, a Memphis-based brokerage firm.
Analysts have pegged the cleanup cost as high as $7 billion, but the disaster is unlikely to be a slam-dunk for any single company, since none has enough resources to take on the job by itself. So far, the effort looks more like layers of contractors hiring other contractors.
"I don't think anybody ends up and says, 'I just made my year because of this spill,' " Hoffman said. "The money's being spread pretty thin."
That hasn't stopped Wall Street from trying to figure out who might see the biggest upside from the disaster. Within two weeks of the April 20 Deepwater Horizon explosion, the stock price of Clean Harbors, a Boston-based hazardous-waste management company, shot up more than 20 percent. During the same period, Nalco Holding Co., which makes the chemical dispersant Corexit, rose to nearly a year high.
Clean Harbors said May 18 that it expects to get a bump of somewhere between $53 million and $70 million to its second-quarter revenue from its work on the oil spill. The company, which posted $1 billion in revenue in 2009, also removed debris from the World Trade Center site after the Sept. 11, 2001, attacks.
Still, Clean Harbors is more used to handling smaller spills, like from a tanker truck accident on the highway.
"For everybody, this is a totally different scale," said Bill Geary, Clean Harbor's corporate counsel for public affairs.
The cleanup business won't necessarily see a bonanza, however, because margins can be low in the industry. And stock prices of both Clean Harbors and Nalco have come down since their highs, especially after critics began questioning whether Nalco's product Corexit was too toxic to be used in the ocean.
There are also companies getting work from BP that are losing business elsewhere because of the fallout from the spill. BP has hired Oceaneering, a Hanover, Md.-based robotics company, to make robots for the company's underwater attempts to fix its broken well. Yet Oceaneering has had to reduce its earnings estimate for 2010 because it's losing so much business from clients hurt by the Interior Department's six-month moratorium on deep-water drilling in the gulf.
BP has major contracts with two national companies to clean up any major spill at Deepwater Horizon: the nonprofit group Marine Spill Response Corp., based in Herndon, and National Response Corp., a wholly owned subsidiary of Seacor Holdings, based in Fort Lauderdale, Fla.