Oil Spill Lessons: Boom for Environmental and Clean-Up Outfits (NLC, CLH, NR, XOM, COP, CEO, RDS-A, TRP, ECL)

Companies that provide the tools and services to clean up oil spills made the news following last year’s disaster in the Gulf of Mexico. Speciality chemical companies that make the fluids used to disperse oil got a boost from clean-up efforts, as did those outfits that offer clean-up equipment.

And there’s plenty of work for the likes of Nalco Holding Co. (NYSE: NLC),Clean Harbors, Inc. (NYSE: CLH), and Newpark Resources, Inc. (NYSE: NR). A ruptured crude oil pipeline belonging to Exxon Mobil Corp. (NYSE: XOM) dumped an estimated 1,000 barrels of oil into the Yellowstone River about 10 miles upstream of Billings, Montana. In China’s Bohai Bay, a well operated by ConocoPhillips Corp. (NYSE: COP) and China’s Cnooc Ltd. (NYSE: CEO) has leaked about 1,500 barrels of oil, and a well in the North Sea operated by Royal Dutch Shell plc (NYSE: RDS-A) has leaked about 1,300 barrels into the waters off the coast of Scotland.

The leaks — and there are plenty of others — have led to a slowdown in offshore drilling and, in the US, more opposition to a plan by Transcanada Corp. (NYSE: TRP) to build the 1,700-mile Keystone XL pipeline to carry crude from the oil sands region of western Alberta to the Gulf Coast. And the new regulatory regime is not just taking hold in the US either.

The five countries surrounding the Caspian Sea and its 30 billion barrels of oil have negotiated an agreement to establish an emergency response mechanism for potential oil spills. Greenland has just published its spill response plan even though test wells off the country’s west coast have so far shown no commercial quantities of oil or gas.

The plan with the largest effect appears to come from the United Nations Environment Programme, related to pollution of drinking water in Nigeria’s Ogoniland. The UN conducted a 14-month study of the effects of 50 years of oil drilling and transportation in the region and concluded that the situation is much worse than originally believed. The clean-up effort is expected to surpass that which followed the Gulf of Mexico spill last year with officials estimating recovery could take 25-30 years.

Tighter regulations and the development by governments of detailed emergency response plans means that companies like Nalco and Clean Harbors have an opportunity to shop their expertise more widely around the world. The work would not be just clean-up, but could also involve specialized consulting.

When Clean Harbors announced its second quarter results earlier this month, the company also indicated it is shopping around for acquisitions. Nalco has also reported second quarter earnings and raised its guidance for both EPS and revenues for the full fiscal year. Nalco has also agreed to a merger with Ecolab Inc. (NYSE: ECL) that is expected to close in the fourth quarter.

Clean Harbors posted an all-time high earlier this month and the stock closed yesterday at $51.57, in a 52-week range of $29.35-$59.35. Clean Harbor shares are up nearly 70% in the past 12 months. Nalco’s shares jumped in mid-July on the merger agreement with Ecolab. Shares closed yesterday at $33.48, in a 52-week range of $21.98-$37.34.

Paul Ausick

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