(Oil spill poll updated for BP tube success)
NEW YORK (
) -- Just when does all the negative press from the
Gulf of Mexico oil-spill disaster become the value investor's signal to buy? There's the old truism in investing -- made famous by
-- that when fear enters the market, the smart investor pounces.
How does an investor identify the troughs in shares of BP,
? How about
, which owned 25% of the Deepwater Horizon well?
Has the 25% to 30% decline in shares of BP and Transocean that the oil spill already exacted called the trough point for investors? It's as murky a question as the scene at 5,000 feet below the surface of the Gulf of Mexico, where oil continues to gush out of the underwater well.
The trough, for example, may have come when Big Oil executives from BP, Transocean and Halliburton faced the House and Senate firing lines in testimony on May 11 and May 12. Some market watchers noted that shares of Cameron and Halliburton, at least, made significant gains after last week's hearings. As the blame was passed around from company to company under tough questioning, ultimately, the hearings seemed more of a game of hot potato between BP and Transocean.
Could the trough in BP's shares have come when
aired a story Sunday night that contained statements from an engineer on the Deepwater Horizon rig who directly blamed the oil giant.?
Mike Williams, an oil-rig engineer, told the
news magazine that BP and Transocean officials tussled over the decision on how to plug the well, with Transocean ultimately losing the battle and BP getting its wish to replace heavier mud in the well's riser pipe with seawater, ahead of cementing the well.
Williams claimed that BP was rushing to cement the well -- even though the actual underwater work was done by Halliburton -- so it could move the rig to another drilling site as fast as possible. The cementing of the well after the heavy mud was removed has previously been cited as a potential cause of the spill, though BP has continued to place blame on the blowout preventer, which was manufactured by Cameron International.
Williams also said that Transocean and BP were aware of problems with the blowout preventer weeks before the rig exploded.
BP and Transocean shares continued to decline Monday, but their losses were in line with the energy sector as a whole, with the price of oil falling below $70 a barrel. If the macroeconomic situation is signaling that the markets could be headed into a prolonged downturn, it only serves to further complicate the general outlook for oil stocks, including those of the spill's primary culprits.
The first photos of oil-tar balls washing up on Gulf of Mexico beaches have already come in. So will it take pictures of sea birds having black stains of oil cleaned from their feathers to call the low point for BP and Transocean shares? We already have those photos, too, which began showing up over the weekend.
Or perhaps the trough in BP's stock was marked by the company's first success in combating the oil spill. On Sunday, the petroleum giant was finally able to get one of its high-tech techniques to work in siphoning leaking oil up to a drillship on the surface.
BP was proud of itself on Monday. It estimated that the siphon was drawing off one-fifth of all the oil leaking from the well. **
By Tuesday, BP had upped that estimate to 2,000 barrels a day, or what BP officials estimate as 40% of the leaking oil, and BP officials indicated that they were working to increase the tube's effectiveness to as much as 5,000 barrels a day siphoned off the leaking well. **
However, the rosy assessment is predicated on the much-criticized BP estimate that the well is only leaking 5,000 barrels a day into the ocean. Other estimates put the leak's spill rate at as high as 70,000 barrels a day.
BP faced additional pressure from the Obama administration over the weekend. The White House asked for assurances from the company that it wouldn't try to take advantage of an existing law that would limit its liability to just $75 million. BP responded on Sunday by saying that its intention all along has been to ignore the cap and pay whatever it takes.**
BP America president Lamar McKay will face the firing line in Washington D.C. again on Tuesday, May 18, facing off against the Senate Commerce Committee, and alongside Transocean president Steve Newman, Round Two of what President Obama referred to last week as the Big Oil blame game.**
There have been plenty of estimates for the spill's ultimate cost to BP, running as high as $16 billion.**
BP said on Monday, May 17, that it has so far racked up $625 million in costs related to the oil spill. BP also said it had started to offer additional grants to tourism businesses in the Gulf area affected by the oil spill.**
BP shares closed Monday at $46.57. That's down from a share price above $60 on April 20, or a decline of 25%.
Transocean shares finished trading Monday at $64.99, versus a share price above $92 on April 20, or a decline of 29%.
Cameron International shares have declined 20% since the explosion. They closed Monday at $37.25.
Halliburton shares, which notably reached a 52-week two days after rig exploded, finished the session at $27.85, equaling the drop in shares of Cameron International since the spill began.
Anadarko shares, which had reached a 52-week high in early April, have dropped 22% to $57.18 as of the close Monday.
More on Value Stocks
The latest bad news related to the crisis -- even amid BP's success in using a siphon -- was a fear that the spill might already be caught in an Atlantic Ocean current know as The Loop, an ocean trend that has the power to send the leak's oil plumes in the direction of the Florida Keys and out into the open Atlantic off the East Coast of the U.S.**
The first tar balls started showing up on shores in the Florida Keys on Monday, but the U.S. Coast Guard could not verify the source. The Coast Guard also said definitively on Monday that the oil spill had not entered the Loop Current, but was approaching it.**
Shares of BP, Transocean, Halliburton, Cameron and Anadarko have been caught up in their own negative current since April 20.
Indeed, it all raises the simple question:
Do you think there's a value play among the stocks caught up in the BP oil spill crisis?
-Reported by Eric Rosenbaum in New York.
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