BP Gains in London as Drilling to Stop Leak Nears Completion

BP Plc rose for a second day as drilling for the relief well that will kill off the Gulf of Mexico oil spill nears completion.

The shares rose as much as 4.9 percent in London and traded at 345.80 pence as of 10:21 a.m. While that’s 16 percent higher than the stock’s low on June 25, the stock is still down 47 percent since the April 20 blowout on the Deepwater Horizon rig that killed 11 workers and started the leak on the ocean floor.
BP said yesterday that it may intercept the damaged Macondo well ahead of schedule this month, kicking off a “kill” process to end the worst oil spill in U.S. history. One of the two relief wells has reached a depth of 17,725 feet, within a few hundred feet of the target.
“The view is that the worst has now passed,” said Peter Hitchens, an analyst at Panmure Gordon & Co. in London. “If the uncertainty about the spill is taken away, you can start looking at fundamentals again.”
BP is a “good buy” after the drop in the share price, Shokri Ghanem, Libya’s top oil official, said in a Bloomberg Television interview today. He’s advising Libya’s sovereign wealth fund to take a stake in BP.

BP said yesterday that the cost of the spill response has risen to $3.1 billion. The company agreed last month to set aside $20 billion for cleanup and litigation related to the accident.

BP canceled three quarters of dividends, reduced investment plans and pledged to sell assets to pay for the fund. The company is said to be considering selling fields in Columbia, Venezula, Vietnam and Argentina raise cash.

BP was the biggest producer of oil and gas last year, beating Exxon Mobil Corp. for the first time. BP made $17 billion in profits for the year on $240 billion of revenue.

“The fear and uncertainty has driven the stock to a new low,” Panmure Gordon’s Hitchens said. “If the relief well can be finished soon, that would be really good news.”


--Editors: Stephen Cunningham, Rob Verdonck.

To contact the reporter on this story: Brian Swint in London at bswint@bloomberg.net.

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FTSE live: BP, Tullow, Vedanta up

The Nikkei and Hang Seng were both in positive territory, while the FTSE 100 Index lifted 71 points to 4894.5, a gain of around 1.5%.

'Miners and banks are pushing us up and there's a decent move in BP,' said Giles Watts, head of equities at City Index. 'There's a slight change in sentiment, but nothing to get too excited about, volumes are very light.'

Commodity stocks were the main beneficiaries as investors took the view that stocks were looking oversold after a poor recent run for world markets.

The risers' board was led by Vedanta Resources, which cheered 103p to 2203p, while BP enjoyed its second positive session in a row with a gain of 13.75p to 347.1p.

The oil major was boosted by an upgrade from RBS to 'buy' from 'hold', with the broker saying the near 50% fall in BP's value since the oil spill in the Gulf of Mexico started in April was overdone from a valuation perspective.

BP has approached sovereign wealth funds with a view to securing a strategic investor to fend off takeover bids while it deals with the spill.

Also in the energy sector, Tullow Oil was 36p up at 1,077p after the oil explorer said it expected Ugandan government approval imminently for a deal which will allow it to begin a landmark oil development in the country.

This followed Royal Bank of Scotland's decision to upgrade the stock from hold to buy and after the oil company insisted it would be able to meet the cost of the Gulf of Mexico oil spill without issuing new shares.

The positive session extended to banking stocks, with Barclays up 10.25p at 269.45p and Lloyds Banking Group ahead 1.65p at 56.4p.

Housebuilders were in positive territory in the FTSE 250 Index after Persimmon reported a 25% rise in half-year turnover and said sales had returned to more normal levels since George Osborne's austerity Budget.

Persimmon jumped 6% or 20.5p to 369p, while Barratt Developments was 4.8p higher at 98.7p.

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