NEW YORK (
) -- The
oil spill in the Gulf of Mexico hit a new critical juncture on Wednesday, when BP began its top kill effort to contain the leaking underwater well. BP and its top kill versus the oil spill -- dubbed by the White House on Tuesday at the worst oil disaster in the country's history -- pits the oil and gas pressure coming out of the seafloor pipe against the pressure that BP can apply by pumping 50,000 barrels of heavy drilling mud into the blowout preventer and down through the deeper stretches of the well.
When it comes to BP shares, however, pressure has been applied -- and that pressure has been mounting since late last week. Shares of all the companies involved in the BP oil spill, including
, have suffered steep declines as the oil spill was compounded by the heavy market selling in recent weeks.
As of Tuesday, the combined market value loss of these companies was near $100 billion.
In the case of BP specifically, during the past three trading sessions coming into Wednesday,
BP has already spent close to $800 million dollars in its failed effort to stop the oil from gushing into the Gulf of Mexico -- at a rate now believed to have exceeded 7 million gallons of heavy crude.
Yet the $800 million already paid by BP is a pittance in comparison to Street estimates that the final price tag to BP will be above $10 billion. The Street estimates don't even take into account the long-term economic damage that could be coming to BP if the federal government decides to take enforcement action against the oil giant as a result of the oil spill. Web publication
reported on Tuesday that the federal government was considering a debarment action against BP, which would not only bar BP from bidding on future offshore drilling assets in U.S. waters, but could wipe out BP's right to drill offshore assets on which it already owns leases.
The BP oil spill, and the huge slide in the market values of the oil companies, raises the inevitable question as to when stocks like BP and Transocean reach an opportune entry point for investors. Yet it is extremely difficult to find a floor in these stocks, as difficult as working with submersible robots at 5,000 feet beneath the Gulf of Mexico surface.
It seemed this week that the oil spill battle was coming down to the federal government versus BP -- or both the federal government and BP having failed the U.S. public, depending on your point of view. Yet on Monday, Transocean shares plummeted by 8%. Transocean shares have recovered over the past two days, but were still trading on Wednesday afternoon at what would have been a 52-week low, previous to the Monday decline.
Based on their Wednesday closing price, Transocean shares have lost 39% of their value since the Deepwater Horizon oil rig exploded. BP shares have lost 30% of their value in the same time period. Cameron shares have declined 24%; while Haliburton shares have lost 23% of their market value. Anadarko Petroleum shares have lost 28.5% in the same time period, as the BP oil spill and decline in the price of crude on fears of a global slowdown have taken down the oil sector.
As far as figuring out how to quantify the blame game going on among the oil companies, that's anybody's guess. A new congressional investigation report released late on Tuesday showed multiple red flags in the events leading up to the oil rig explosion. Equipment readings showed gas bubbling within the underwater well, signaling a potential blowout. The congressional investigation also echoed previous criticism that the decision to replace heavy drilling mud in the well with seawater in the 24 hours before the explosion may have proven to be a major gaffe. BP conceded in its testimony that workers may have made a mistake in analyzing the pressure tests, but so far, BP and Transocean have not been completely forthcoming about these events.
BP testimony, which made up a good portion of the latest congressional investigation, continued to push blame to other companies, including
, saying in the Congressional report that the cement used by Haliburton to plug the well may have been contaminated, and the blowout preventer may have had multiple problems.
With the world watching the BP top kill effort live, the ante has been upped in trying to figure out if the tide is about to be turned in the favor of these oil stocks. BP has said that it could be as long as two days before the success or failure of the top kill can be ascertained. Will the tide of heavy crude oil continue its wash over the Gulf Coast, and remain a drag on BP and the rest of the oil spill stocks?
The conventional market wisdom dictates that when there is fear in the market, the smart investor profits. However, when there is an oil spill 5,000 feet below the surface of the Gulf of Mexico, which has already been dubbed the worst in the country's history, and which BP has botched at every point, is the risk-reward ratio not tilted in favor of fear, and would the smart investor put a containment dome on any inkling to invest in BP?
Thus, we asked readers of
Do you think there is a value play among the stocks caught up in the BP oil spill crisis?
Survey takers clearly have the risk-taking gene. Approximately 43% of survey respondents said that among all the stocks stained by the oil spill, BP is the value play of the bunch.
Yet there was a healthy dose of risk aversion evidenced by the survey also. Approximately 21% of survey respondents said that whether it is BP, Transocean, Cameron or Halliburton, they were staying away from all of the oil spill stocks, even with the steep declines in share prices.
Approximately 13% of survey takers said they were bulking up on both BP and Transocean shares, while another 10% of survey takers said Transocean was the true value play among the oil spill bunch.
No one seemed ready to snap up all these oil shares as a lump sum value play, with only 6% of survey respondents indicating that they were going "dollar store" shopping among BP, Transocean and the rest of the stocks.
A small group of survey takers were bypassing BP and Transocean, with 7% of the audience indicating that Halliburton, Cameron, and Anadarko were the wise value bets.
Whatever your value bet among these beaten down oil stocks, just remember that there is no financial equivalent of a blowout preventer to protect your losses. Not that blowout preventers work anyway.
Oil Spill in Pictures: Gulf of Mexico Impact
-- Reported by Eric Rosenbaum in New York.
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