BP plc’s market value was slashed further last Friday as shares plunged to new lows since its well blowout April 20 in the Gulf of Mexico (GOM). The company’s market cap has been beaten down about $100 billion since the disaster. Liquidity concerns and the threat that a major storm could enter the GOM and disrupt oil collection are making investors nervous.
BP shares plunged as low as $26.83 in Friday trading on the New York Stock Exchange before closing at $27.02, down almost 6% from the previous close. The stock’s 52-week range is $26.83 to $62.38. On April 20 BP shares closed at $60.48.
Investor worries were stoked by an analyst’s suggestion that the company could face a liquidity challenge in the case of “a sharp rise in liabilities or alternatively a collapse in oil prices.”
Friday marked the 66th day of the Macondo well blowout catastrophe in the Gulf of Mexico.
“The cost of the response to date amounts to approximately $2.35 billion, including the cost of the spill response, containment, relief well drilling, grants to the Gulf states, claims paid and federal costs,” BP said Friday.
“With debt expensive and asset sales taking time, we consider that equity-linked financing — perhaps backed by Sovereign Wealth as a show of support — could prove the attractive short-term solution” for BP, wrote Nomura analyst Alastair Syme in a note.
The potential for heavy weather in the GOM also has spooked investors (see related story). On Friday the U.S. Coast Guard said that oil siphoning at the blownout well site would be suspended five days before the forecasted arrival of gale-force winds to the area. Preparations for a storm are expected to take five days, explained USCG Admiral Thad Allen.
Meanwhile, work on the first relief well, which started May 2, continues. The well reached a depth of 16,275 feet on Wednesday before the drill string was removed from the well to carry out the first “ranging” run using wireline. During the ranging run, the MC252 well was successfully detected. Subsequent ranging runs will be needed to more precisely locate the well. Drilling and ranging operations will continue over the next few weeks toward the target intercept depth of approximately 18,000 feet, when “kill” operations are expected to begin. The second relief well, which started May 16, is drilling ahead at a measured depth of 10,500 feet. Both wells are still estimated to take approximately three months to complete from commencement of drilling, BP said.
Two systems continue to collect oil and gas flowing from the Deepwater Horizon’s failed blow-out preventer and transport them to vessels on the surface.
The lower marine riser package (LMRP) containment cap, installed on June 3, takes oil and gas to the Discoverer Enterprise where oil is collected and gas flared. The second system, which began operations on June 16, takes oil and gas to the Q4000 vessel on the surface where both oil and gas are flared. Oil and gas collection through the LMRP cap containment system was suspended for approximately 10 hours on Wednesday following an unexpected release of seawater from the Discoverer Enterprise.
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