BP shares drop further as sellers overwhelm flurry of buying sentiment

BP shares gyrate lower in London trading

LONDON — BP shares continued to fall Friday as the company felt the impact of the massive oil spill from an exploratory well in the Gulf of Mexico.

BP shares closed down 1.5 percent at 575.50 pence on the London Stock Exchange, a day after dropping 7 percent in London. Shares had been as high as 580 pence — a drop of 0.7 percent — at midday after the shares rallied on “Buy” recommendations from some analysts.

“This morning I think there’s been a couple of U.S. investment banks have rushed out buy notes,” said Tony Shephard, who tracks the oil industry for Charles Stanley & Co. in London.

Jonathan Jackson, analyst at Killik & Co. in London, cited Merrill Lynch’s analysis that a six-month cleanup effort could cost around $3 billion for a company which had a $5 billion profit in the first quarter.

“We are inclined to see this as a buying opportunity,” Jackson said in a research note.

Whether it is depends on spiraling costs which are far from being totaled up.

BP confirmed Friday that it is self-insured for any costs related to the spill, so the company will have to absorb its full share of spending currently running about $6 million a day plus $100 million which it expects will be spent bringing in another rig to drill a relief well.

“It is too early to quantify other potential costs and liabilities associated with the incident,” BP said in a statement released in London on Friday.

Shares have dropped from 655.4 pence on April 20, the day the Deepwater Horizon oil rig was torn by an explosion, to 584.2 pence at the close on Thursday. In the first 15 minutes of trading on Friday, the price fell as low as 571 pence but rebounded later to nearly 580 pence.

In New York on Thursday, BP shares fell $4.78 to close at $52.56, taking the fall in the company’s market value to about $25 billion since the explosion. Shares continued to slide a bit Friday, trading at $52.48 by afternoon in New York.

Jackson said that BP’s difficulties had wider implications for the industry.

“As part of its efforts to increase security of supply, the U.S. government is looking to increase investment to develop domestic reserves. Following this spill, it may be more difficult to achieve this aim as environmental groups step up their opposition,” Jackson said.