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Americas

BP shares rise as oil spill hits Texas coastline

Text by News Wires

Latest update : 2010-07-06

BP shares rose on Tuesday by 3.7 percent on talk that the oil giant was seeking a strategic partner for a stake sale and that it would not issue new equity. However, the spill in the Gulf of Mexico has hit Texas beaches.

REUTERS - Stock in BP rose on Tuesday as the British oil major ruled out a share issue and talk persisted of sovereign wealth fund interest, while its Gulf of Mexico oil slick spread to the Texas coast.
 
BP shares were up 3.7 percent after hitting their highest in two weeks. They at one stage had lost more than $100 billion in value in the 78 days following its April 20 oil rig explosion that unleashed the massive spill.
 
Backing came from Royal Bank of Scotland, which upgraded the stock to ‘buy’ from ‘hold’.
 
The shares have drawn some support from talk that the company is a takeover target and has approached sovereign wealth funds with offers of a stake to ward off hostile bids.
 
On Tuesday, a source in the United Arab Emirates added to the speculation sparked by weekend press reports, saying that BP executives had held talks with a number of sovereign wealth funds including Abu Dhabi, Kuwait, Qatar and Singapore.
 
“BP is seeking a strategic partner so it doesn’t get taken over by other major oil companies such as Exxon and Total,” the source said.
 
BP declined to comment on speculation of a stake sale but said there were no plans to issue new equity to anyone, allaying some investors’ fears of a dilutive share issue.
 
“(There are) no current plans to issue new equity. We’re always happy to welcome new shareholders or existing shareholders who wish to increase their holdings but there’s no plans to issue new equity to anyone,” the spokesman said.
 
Sovereign funds already hold shares in BP, with Norway and Kuwait controlling about 1.8 percent each, China 1.1 percent and Singapore 0.7 percent, according to Thomson Reuters data.
 
RBS said in a note that the market had already discounted a pessimistic view of the spill.
 
“Our base case scenario is significantly less pessimistic and in our view, the risk/reward profile of the shares is currently favourable,” it said.
 
“If BP’s share price were to remain depressed, it could also trigger credible merger speculation,” although it added that an approach to BP was unlikely before the well was plugged given management’s focus on the well and the fact that any mention of cost synergies would be politically unacceptable at this stage.
 
A top 10 shareholder said that any share issue would be viewed extremely negatively.
 
“It will be a kind of suicide note—people will turn up with flame throwers at management. There is a chance that they will issue a bond—they will do that post the well being shut.  But the equity stuff is delusional.”   
 
The Times newspaper reported that Britain was drafting contingency plans should BP collapse, but did not give details.  BP is a staple holding of many UK pension funds and is a flagbearer for British industry.
 
The paper said officials from the Department of Business and the Treasury were holding talks about BP’s future. The Treasury declined to comment. The Department of Business could not be immediately reached for comment.
 
Texas hit
 
BP confirmed on Monday that government tests showed tar balls that washed up on the Texas coast near Galveston were from the spill, but only about five gallons were found.
 
Texas joins Louisiana, Mississippi, Alabama and Florida among the states whose coastlines have been soiled by the largest offshore oil spill in U.S. history.
 
The U.S. Coast Guard also reported an oily sheen and tar balls in the inland estuary of Lake Pontchartrain, which surrounds much of the city of New Orleans and its suburbs. The oil is being tested to determine if its origin is the Deepwater Horizon well, the government said.
 
During the long U.S. Independence Day holiday weekend vacationers largely avoided beaches tarred by the leaking well.
 
Attempts to stop the flow have not worked, with BP pinning hopes on a relief well that should be completed in August.
 
The disaster is playing havoc with fragile coastal ecosystems, fishing communities and a tourist industry seen as especially important during a time of high unemployment.
 
An area of disturbed weather over the southeastern Gulf of Mexico coudl strengthen into a tropical storm this week, the U.S. National Hurricane Center said. Most computer models showed the storm on a track that would take it over central Texas, well away from the blown-out BP well.
 
Some oil gushing out a mile undersea is being captured through a pipe, while some is being burned off.
 
Tests on a supertanker adapted to skim large quantities of oily water from the surface were inconclusive because of high seas, ship owner TMT Shipping Offshore said.

 

 

Date created : 2010-07-06

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