Tags: BP Shares Rise After Leaking Well Permanently Sealed

BP Shares Rise After Leaking Well Permanently Sealed

Monday, 20 Sep 2010 07:08 AM

Shares in BP rose 1.5 percent and outperformed rivals on Monday, after the oil major said it had permanently sealed an oil well in the Gulf of Mexico that caused the United States' worst ever oil spill.

However, analysts cautioned BP still faced problems in rebuilding its business in the U.S., its most important market, in the face major political uncertainties.

BP said on Sunday that it had completed the killing of the blown out Macondo well by drilling a relief well into its base and that the cost of the response effort should start to fall from now on.

Although no oil has leaked since a temporary cap was placed on Macondo on July 15, Jason Kenney, oil analyst at ING, said BP had hit "a significant milestone" by plugging the well permanently.

"The market continues to over-estimate total net costs for BP by as much as $40 billion," Kenney said regarding the $65 billion drop in BP's market value since the spill started in April.

However, some analysts said considerable uncertainties remained.

"This is only the first step in resolving the situation," said Dougie Youngson at Arbuthnot.

Youngson highlighted ongoing civil and criminal probes by U.S. authorities and the potential for BP to face fines of over $20 billion if it is found grossly negligent, compared to fines of around $3 billion if it is not.

Some U.S. politicians are also pushing to bar BP from drilling offshore the U.S. for a period of up to seven years, something which would severely hit the London-based company's plans to expand sharply in the Gulf of Mexico.

COMPENSATION PAYOUTS SOAR

The total bill for fighting the spill and compensating victims hit $9.5 billion by Sept. 18, BP said.

Europe's second-largest oil company by market value said payouts to people affected had dramatically increased since it surrendered authority for dispensing funds to an independent administrator.

BP said the Gulf Coast Claims Facility (GCCF), the $20 billion fund it set up to compensate fishermen, hoteliers and retailers whose business was hit by the spill, had paid out 19,000 claims totaling over $240 million.

The GCCF is run by lawyer Kenneth Feinberg, formerly the Obama Administration's executive pay Czar.

GCCF payouts in the first two weeks of operations were around $3.5 million per day, broadly in line with the rate at which BP had previously been disbursing funds.

Since Sept. 3, the amount of money being paid out has risen to an average of over $12.5 million.

Just over a week ago, Bob Dudley, who will take over as BP's chief executive on Oct. 1, told analysts that he expected the $20 billion fund to more than cover the total valid claims for compensation.

BP shares traded up 1.8 percent at 410 pence at 0724 GMT, ahead of a 0.5 percent rise in the STOXX Europe 600 Oil and Gas index.

© 2017 Thomson/Reuters. All rights reserved.

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Shares in BP rose 1.5 percent and outperformed rivals on Monday, after the oil major said it had permanently sealed an oil well in the Gulf of Mexico that caused the United States' worst ever oil spill. However, analysts cautioned BP still faced problems in rebuilding its...
BP Shares Rise After Leaking Well Permanently Sealed
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2010-08-20
 

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