BP shares climbed in London on Friday after its boss survived a bruising encounter with U.S. lawmakers and as hopes rose its $20 billion oil spill compensation and clean-up fund will cap public anger.
London shares, however, were sent down after Moody's cut BP's credit rating by three notches to an A2 on Friday, and said it might downgrade BP's rating again.
The Moody's downgrade was BP's third downgrade in a week.
The worst oil spill in U.S. history, from a leaking deepwater well in the Gulf of Mexico, has strained the reputation of President Barack Obama, sullied the region's rich wildlife, and wounded its fishing and tourism industries.
The likely cost of cleanup, compensation and fines has almost halved the value of BP — once Britain's biggest company.
But after Chief Executive Tony Hayward survived attacks on him by a congressional committee on Thursday, investors in London were in a mood to heed some analyst upgrades.
"I think it's just follow through from the relief that maybe the worst of U.S. public opinion might have been capped, if not the leak or the bill," says Oriel Securities analyst Brendan Wilders, who has a "buy" rating on the stock.
BP shares remained in positive territory through midday in London, rising 2.4 percent to 368.4 pence ($5.46).
The shares had rallied 6.7 percent on Thursday, a day after the meeting with President Barack Obama in which BP executives agreed to suspend dividend payments and set up a $20 billion fund to pay for damages.
Shares were trading at 655 pence before the explosion and fire aboard the Deepwater Horizon drilling rig which killed 11 workers and unleashed a gusher of oil from the seabed.
Near midday in U.S. trading, BP was up 18 cents, or 0.6 percent at $31.89.
Ratings agency Standard & Poor's downgraded BP on Thursday, describing the fund as a competitive disadvantage, and said it could cut again if costs rise, while BofA Merrill Lynch and Seymour Pierce also cut their recommendations.
But Collins Stewart and Societe Generale, which had been cautious on BP since the accident, upped their ratings to "Buy" from "Hold," saying the share drop was so severe that BP now offered good value.
Most analysts kept "buy" or "outperform" ratings on BP as the shares collapsed, citing their cheapness relative to the company's asset base and rivals' shares, only for the worsening technical and political situation to push the shares lower.
From a mile below the surface, crude oil continues to gush at a rate of up to 60,000 barrels a day, although BP is siphoning off some using a containment cap system and is drilling relief wells it hopes will halt the leak in August.
BP collected 25,000 barrels of oil from its blown-out Macondo well in the Gulf of Mexico on Thursday, Coast Guard Admiral Thad Allen said Friday.
Louisiana Treasurer John Kennedy estimates environmental and economic damage could range up to $100 billion for his state and others along the Gulf Coast.
That domestic political pressure underpinned a grueling week in Washington for Hayward, who survived a trip to the White House to meet an angry President Obama on Wednesday and then endured a verbal assault from lawmakers on Thursday.
His failure to explain the causes of the spill, however, led to renewed calls for him to go.
"No one at BP has been fired," Florida Democratic Representative Kathy Castor told Reuters Insider after the hearing. "It's time for heads to roll at BP."
In the meantime, some in the industry see BP as vulnerable to a takeover — weakened by the $20 billion fund it is having to create.
"I would be shocked if two years from now BP is still an independent company," said Christopher Zook, chairman and chief investment officer of CAZ Investments in Houston.
Russian President Dmitry Medvedev added to the negative outlook in a Wall Street Journal interview on Thursday, where he questioned whether the oil spill might lead to the breakup of BP and described the spill as "a wakeup call."
To help plug the gaping hole in its finances left by the spill clean-up fund, BP has announced plans for a $10 billion asset sale program, although on Friday it said it had no plans to sell its stake in top Russian oil firm Rosneft.
"BP has not sold... and we are not planning to sell," David Peattie, head of BP's Russian operations, told reporters on the sidelines of the St Petersburg Economic Forum.
The disaster, which fouled at least 120 miles of coastline and damaged the multibillion-dollar fishing and tourism industries, killing dolphins and other sea life, prompted Obama to ban deepwater offshore drilling for six months.
The International Energy Agency (IEA) has said the spill would raise costs, delay new projects and prompt a thorough review of offshore regulation.
The IEA's executive director, Nobuo Tanaka, told Reuters in an interview it estimated 100,000-300,000 barrels per day could be lost if new projects in the Gulf of Mexico were delayed by one or two years until 2015.
"If the same one-year or two-year delay happens globally, to global offshore drilling new projects, if that happens, we calculate it is about 800,000 to 900,000 barrels per day," he said. This amounts to about 1 percent of current total oil production.
Environmentalists, however, are concerned the flurry of headlines around the political theater in Washington and market reaction in London and elsewhere is taking the focus off the ecological disaster.
"This oil is already into the wetlands and more is coming up every day. You cannot clean it out of there," John Hocevar, a marine biologist with Greenpeace, told Reuters in Louisiana. "The impact of the spill is going to be felt for decades."
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