BP WATCH: BP's US Shares Slip Despite Progress With Well Test

16th Jul 2010 20:35

By Donna Kardos Yesalavich Of DOW JONES NEWSWIRES NEW YORK (Dow Jones)--Shares of BP PLC (BP, BP.LN) fell in the U.S. Friday although its recently placed cap continued to show promise for having the ability to completely shut-in an overflowing well in the Gulf of Mexico. BP's American depositary shares were off 4% to $37.37 in recent trading as investors who bought the stock in recent weeks on optimism for the new cap cashed in on its recent gains. Even with Friday's drop, BP's U.S. shares are up 10% for the week and up 40% from their 14-year low hit last month. "It's kind of a sell-the-news situation," said Charles Mercer, portfolio manager of the Aston/Todd-Veredus Select Growth Fund. "The capping of this well has been anticipated for a couple weeks now. They said they weren't changing their time frame, but people had been figuring out it wasn't going to be mid-August by the time they got this thing capped." After BP said the flow of oil into the Gulf of Mexico from the well was halted during a well integrity test Thursday afternoon, the test survived the night as pressures steadily rose. For now, the flow of oil out of the Macondo well remains temporarily halted as the well continues to undergo the test, which could last until Saturday. "The current monitoring shows no negative evidence, if you remember the big concern was whether we could have a breach to surface," BP Vice President Kent Wells said during a teleconference. Meanwhile, the Obama administration looked to prevent investors from getting too excited over the results of the well test thus far. While President Barack Obama said it is "good news" that a new cap has stopped oil flowing from BP's broken well, he warned the public not to "get ahead of ourselves" and believe the well is completely sealed. "We're not surprised, but certainly pleased to see the initial results from BP's cap," said Whitney Tilson, managing partner of T2 Partners, which has a stock position in BP. "The story is playing out as we'd hoped." The firm is holding its position in BP for now, "in anticipation of more good news coming out and as the stock starts to approach intrinsic value," Tilson said. "But at this point we still think it's cheap." Options traders were adding bullish positions Friday, with volume elevated and more activity in calls, which convey the right to buy shares, than in puts, which convey the right to sell shares. Meanwhile, the cost to insure the company's debt fell. The cost was recently at $335,000 annually to cover $10 million of bonds for five years, down from $367,000 as of Thursday's close, according to Markit. BP's London shares rose 1.3%. -By Donna Kardos Yesalavich, Dow Jones Newswires; 212-416-2188; [email protected] (Susan Daker and Siobhan Hughes contributed to this article.) (END) Dow Jones Newswires July 16, 2010 15:35 ET (19:35 GMT)