BP shares tumble over gushing oil well error

SHARES IN BP fell 8 per cent yesterday after it said a leaking well in the Gulf of Mexico was gushing at five times the rate …

SHARES IN BP fell 8 per cent yesterday after it said a leaking well in the Gulf of Mexico was gushing at five times the rate initially thought and US president Barack Obama said the British oil company would ultimately foot the bill for the clean-up.

Mr Obama said the federal government will use “every available resource” to contain damage from the spill, which has been declared an event of “national significance”.

Mr Obama said he has contacted governors of states on the Gulf Coast about the impact of the spill. Sixteen federal agencies have been mobilised to respond to the spill from a damaged well and the declaration will open the way for more resources, homeland security secretary Janet Napolitano said earlier.

Investors are growing increasingly concerned about the impact of the leak. Since the Deepwater Horizon drilling rig caught fire, BP’s shares have fallen 11 per cent, knocking about $20 billion off its market capitalisation.

“It could have a material impact on the company’s financials,” one fund manager said.

The drop is despite the company reporting much better than expected first quarter results on Tuesday.

BP’s shares traded down 6.8 per cent at 582 pence in early afternoon, lagging a 1 per cent drop in the STOXX Europe 600 oil and gas index. As happened in previous days, the biggest share price drop came after markets opened in the United States where BP also has a listing, with the share dropping 8 per cent.

BP said the clean-up operation was costing it $4 million a day, although this is likely to increase sharply if the slick hits land.

BP could face much higher costs from potential lawsuits, punitive damages and reputational damage, which would hit its ability to grow output in the US, its most important market.

The clean-up team, which includes the US coast guard and other agencies, began a controlled burn on parts of the slick on Wednesday, to try to limit the amount of oil that looks set to hit the shore.

Eleven workers are missing and presumed dead after the worst oil rig disaster in almost a decade.

Swiss-based Transocean Ltd’s Deepwater Horizon rig sank on April 22nd, two days after it exploded and caught fire while it was finishing a well for BP about 40 miles (64km) southeast of the mouth of the Mississippi River. – (Reuters/Bloomberg)