US-Listed BP Shares Rebound As Fears Over Spill Liability Ease

10th Jun 2010 18:19

By Isabel Ordonez Of DOW JONES NEWSWIRES HOUSTON (Dow Jones)--U.S.-listed shares of BP PLC (BP) shot up Thursday, erasing some of the previous day's sharp losses as fears eased about the British oil giant's ability to withstand the expense of the Gulf of Mexico oil-spill recovery. American depositary shares of BP dropped to a 14-year low Wednesday afternoon as jittery investors dumped the stock as U.S. lawmakers ratcheted up demands that BP cover all costs related to the spill. Interior Secretary Ken Salazar told lawmakers Wednesday that BP will have to pay the salaries of any oil-services workers who lose their jobs because of a moratorium on new deepwater drilling. BP's shares have lost nearly half their value since the late-April explosion and sinking of the Deepwater Horizon that unleashed the leak, now its 52nd day. "There was a lot of fear in the market yesterday, and people maybe have slept on it and are getting a little less scared of the stock," said Raymond James analyst Alex Morris. "People might just be thinking that yesterday's selloff was overblown and premature." Shares of BP continued to slump in London, however, dropping 11% to a 13-year low Thursday morning before clawing back some of the losses. U.K. investors have been especially spooked by U.S. lawmakers' repeated demands that BP suspend its dividend payout--a key income source for British pension funds and other investors--until the oil leak is plugged and the spill cleaned up. Analysts said BP's continued slide in the U.K. Thursday reflected a delayed reaction to the selloff in the U.S. In London, shares of BP closed down 6.7% at 365 pence, while BP ADS's were recently up 8.2% at $31.59 on the New York Stock Exchange. BP bonds generally rallied Thursday, though they are still down significantly month to date. The BP 5.250% bond due Nov. 7, 2013, was the most active issue. At 12:52, it was trading at 5.76 percentage points over comparable Treasurys, yielding 6.969%. The cost of insuring debt issued by BP has started to fall at a quicker pace after spiking Thursday in line with a major drop in the company's share price Wednesday and into this morning. At 11:40 a.m. EDT, the cost of insuring BP, via instruments known as credit default swaps, was quoted at 477.5 basis points, according to CMA Datavision. That is down from 501.3 bps at 8:25 a.m. and from 557 bps at 4:18 a.m. in London trading hours. Several U.S. analysts called Wednesday's freefall an overreaction, despite the heated rhetoric against the company in Washington. "We estimate that BP shares currently discount $60 billion in potential liabilities, which we think is very unrealistic," said Fadel Gheit, an analyst at Oppenheimer & Co. Oil-spill clean-up costs aren't consuming cash so fast that BP can't keep up, and any legal damages, fines and awards from lawsuits are years away, said Tudor Pickering Holt & Co. analysts in a note to clients. The firm noted BP had $6.8 billion in cash at the end of March and generated around $3.5 billion in cash in the first quarter before dividends. "Sooner or later, politicians are also going to think through the outcomes...and we think they'll come to the same conclusion that we have--BP is worth more alive than dead," Tudor Pickering said. Meanwhile, BP might be increasing its ability to capture crude spewing from the broken Macondo well, though all the extra oil will be flared off into the atmosphere instead of shipped to the market, U.S. Coast Guard Adm. Thad Allen, the federal incident commander, confirmed Thursday. BP captured 15,800 barrels of oil Wednesday, a small increase over its Tuesday figure of 15,600 barrels. -By Isabel Ordonez, Dow Jones Newswires; 713-547-9207; [email protected] (James Herron in London and Susan Daker contributed to this article.) (END) Dow Jones Newswires June 10, 2010 13:19 ET (17:19 GMT)