(Oil Spill Losers story updated for Halliburton, Schlumberger losses, and losses in all energy service stocks)
NEW ORLEANS (TheStreet) -- The rally in shares of BP and Transocean (RIG) turned out to be as short-lived as optimistic reports on the success of BP's top kill method to contain the oil spill.
While there were consecutive indications on Thursday and Friday that the top kill was showing some signs of effectiveness in slowing the oil spill, Thursday's early optimism clearly went too far, and both BP and Transocean shares were down close to 6% on Friday at midday. BP's midday Friday loss was more than twice the decline of any of the other integrated major oil companies. The Transocean decline on Friday was equal to the decline in stocks within the more volatile offshore drilling sector, where fears of the impact from President Obama's ban on offshore drilling, announced Thursday, exacted a toll on all the major players.
Diamond Offshore Drilling (DO), Rowan Companies (RDC) and Pride International (PDE) were down by as much as Transocean's 5% decline at midday Friday.
Jeffries & Company said Friday that offshore drillers including Diamond Offshore, Transocean, Price and Rowan, as well as Noble (NE)
and ENSCO (ESV)
, could see 5% to 15% profit dips in 2010 and 2011, as the Gulf of Mexico business opportunities wane. Noble and ENSCO were both also declining by as much as 4% at midday Friday.
Companies involved in providing deepwater services to oil drillers and integrated oil giants were taking huge losses on Friday.
, the deepwater engineer at the center of the failed effort to cement the BP oil well shut, was down close to 8% early on Friday afternoon.
Oceaneering International (OII)
was leading losses among deepwater drilling servicers, down more than 10%. Superior Energy Services was down 8.5%, while Helix Energy Solutions (HLX)
was down more than 7%.
Some big names among the energy services and engineering firms, Schlumberger (SII)
and Baker Hughes (BHI)
, were both down by more than 6% early on Friday afternoon.
There were indications that the top kill was finding a worthier foe in the pressure of oil and gas coming out of the BP well than Thursday's optimistic forecasts could have led one to believe. Whether the BP top kill will ultimately slow the oil leaking from the Gulf of Mexico for long enough to cement the well shut permanently remains an open question, and BP said on Friday that it could be two days before it has the answer.
>>BP Top Kill: Live Video Feed
Late on Thursday, the top kill had to be abandoned temporarily when too much of the heavy drilling mud that had seemed effective earlier in the day was overcome by the pressure coming out of the leaking well, and too much of the mud was forced back into the Gulf waters.
The U.S. public is playing the waiting game with BP again, while President Obama toured the Gulf on Friday.
Throughout the BP oil spill crisis and all of the previous failed attempts by BP to stop the gushing oil, BP officials have floated confidence across the airwaves while buying time for more unproven methods to stop the gusher 5,000 feet below the surface of the Gulf of Mexico. While BP chief operating officer Doug Suttles showed an unusually impartial side this week -- saying that BP could not be either pessimistic or optimistic about the top kill. "We have not stopped the flow," Suttles said. BP CEO Tony Hayward continues to put the chances of success at 60% to 70%.
By Friday morning, Coast Guard Rear Admiral Allen was saying on national television that the biggest challenge for the top kill was to sustain the pressure from the heavy drilling mud flooding into the well. The Coast Guard Rear Admiral had spurred optimism on Thursday when he gave a quote to the Los Angeles Times
saying that the top kill was working.
BP CEO Hayward was also on national TV on Friday, saying the top kill was "going pretty well according to plan." According to plan, however, does not mean eventual success.
>>Oil Spill in Pictures: Gulf of Mexico Impact
The Coast Guard's Allen said on Friday morning that the next 12 hours to 18 hours will be critical in judging the BP top kill. Yet, on Thursday, BP CEO Hayward had said that a definitive judgment of the top kill would be available by the end of the day Thursday, and said on Friday that it may take until Sunday before BP knows the result of the top kill effort.
Is BP just buying time again and putting its most optimistic face forward, as it has done in every other failed effort to slow the oil spill?
Meanwhile, the estimates for the amount of oil leaking in the Gulf of Mexico from the BP well indicate it has already surpassed the Exxon Valdez disaster.
Based on the mid range of estimates released by the Flow Rate Technical Group, the BP well may have leaked about 527,000 barrels into the Gulf of Mexico, which would be almost twice the 262,000 barrels spilled by the Exxon Valdez in 1989, and also make it the worst oil spill in U.S. history, which the White House had already conceded it was earlier in the week.
BP has spent $930 million so far responding to the ruptured well, it said in a regulatory filing Friday, including costs for clean-up and prevention work, drilling relief wells, paying grants to Gulf states, damage claims and federal costs. BP says it's too early to quantify other potential costs and liabilities associated with the spill.
The spill has cost BP a total of about $24 million a day. Average daily profit last year was $45 million a day, according to data compiled by Bloomberg.
The lawsuit lists potential damage claims of about $2.5 billion to the Gulf fishing industry; $3 billion to tourism; $700 million in remediation efforts so far; $6 million a day in continuing costs and "incalculable damages to BP's reputation."
-- Reported by Eric Rosenbaum in New York.
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