BP heads for first weekly gain since spill began
BP is heading for its first weekly gain since the Gulf of Mexico oil spill began after relief wells to stop the worst oil spill in US history progressed ahead of schedule.
The shares traded at 329.40 pence as of 12:11pm in London, 8.1pc higher than a week ago and the biggest five-day jump since March 2009.
The stock is still down 50pc since the April 20 blowout on the Deepwater Horizon rig that killed 11 and triggered the spill.
The first intercept well is ahead of schedule and about 600 feet from the damaged well, US National Incident Commander Thad Allen said yesterday.
The cleanup effort dodged a direct hit from Hurricane Alex this week, and BP last month pledged a $20bn fund for damages, paid for by canceling three quarters of dividends, asset sales and lower investment.
“The market had gone to an extreme level of emotion,” said Christopher Wheaton, who manages about $400m of securities at Allianz RCM’s Energy Fund in London, including BP shares.
“There was concern the relief wells wouldn’t work, but now it’s clear BP will be able to cap this and cut off the most extreme tail risk. We’re beyond the turning point.”
The relief well is designed to drill into the leaking Macondo well and pump in mud and cement to permanently seal it.
While the company said earlier this week that it’s sticking to its schedule for an August completion, Allen said at a White House briefing yesterday that “I’d rather under-promise and over-deliver” on the timetable.
The drop in BP shares since the accident has wiped £60bn (€73bn) off the company’s market value, prompting JPMorgan analyst Fred Lucas to say this week that rivals Exxon Mobil and Shell may consider bidding for the company.
BP collected a total of 23,080 barrels of oil on June 30. The government estimates the well may be leaking as much as 60,000 barrels a day, and BP is working on upgrading its containment system to increase its capacity before the relief wells are finished.
Swells of up to 10 feet from the hurricane forced a suspension of skimming and booming operations.
The rough seas prevented work by a relief ship designed to suck up 25,000 barrels a day of oil. The ship won’t be able to start working until at least July 7.
The relief wells were scheduled to take three months to complete after drilling began in May. Iain Conn, head of refining and marketing at BP and a member of its board, said in an interview June 29 that the company is making “good progress” on the wells.
“This process slows the closer you get because we’re ranging, finding the well, drilling ahead, checking, and drilling again,” Conn said. “It’ll take time and we want to get it right.”