Investors dump shares of oil drillers, BP after downgrades and president’s tough talk on spill

Investors flee BP and drilling companies

Investors pummeled shares of oil drillers and BP on Tuesday, after President Obama talked tough about dealing with the worst oil spill in the nation’s history.

Analysts added fuel to the sell-off by cutting their earnings outlooks on companies that figure to be hurt by the six-month moratorium on deepwater drilling in the Gulf or the temporary delay in issuing permits for drilling in shallow water.

Goldman Sachs even suggested the deepwater moratorium could go for as long as a year with limited activity until 2012.

Obama told NBC’s Matt Lauer in an interview for the “Today” show that he has spoken with Gulf fishermen and oil spill experts about the spill.

Lauer noted that some critics say this is not the time for the president to only meet with experts and advisers but to “kick some butt.”

“I don’t sit around just talking to experts because this is a college seminar,” Obama said. “We talk to these folks because they potentially have the best answers — so I know whose ass to kick,” Obama said.

The comments helped set the stage for a big sell-off of BP and drilling companies with operations in the Gulf. Shares of BP, which leased the rig that exploded and sank in April, sank to a 15-month low. Shares of Transocean, which owned the rig, hit their lowest level in 18 months.

“I think the president’s comment fueled speculation about potential liabilities,” Oppenheimer & Co. analyst Fadel Gheit said Tuesday. “But, heated political statements aside, all the companies involved will have their day in court and it may be years after the president leaves office before the final settlement.”

Shares of the five companies directly involved in the spill have lost about $125 billion in market value since the explosion and fire that killed 11 workers on the BP-leased rig.

Pressure from Obama and some members of Congress on BP to reduce its dividend also weighed on its shares, said analyst Pavel Molchanov of Raymond James.

BP can afford to maintain the dividend, but it could “cut it or suspend it altogether as a way of let’s say offering a concession or responding to this political pressure,” he said.

BP shares have lost $81 billion, or 43 percent, of their market value. Shares of Anadarko Petroleum, a 25 percent owner of the well, have dropped about $16 billion, or 43 percent. The value of Transocean shares has been cut in half with a loss of $15 billion in market cap.

That does not include how much BP has spent on trying to contain the spill. BP said Monday that those costs have totaled $1.25 billion so far.

Goldman Sachs said in a research note that the moratorium also means that the fees drillers can charge likely will fall because many will not be drilling in the Gulf.

Goldman cut its rating to “Sell” from “Neutral” for drillers Diamond Offshore and Atwood Oceanics. It downgraded Noble and Transocean to “Neutral” from “Buy.”

Jefferies & Co. cut its earnings estimate on driller Oceaneering International because of uncertainty over the moratorium. FBR Capital Markets downgraded Baker Hughes and Noble Corp. to “Market Perform” from “Outperform” and Diamond Offshore to “Underperform” from “Market Perform.”

BP shares fell $2.08, or 5.7 percent, to close at $34.68. Transocean shares dropped $2.84, or 5.8 percent, to close at $46.33. Anadarko shares fell $2.02, or 4.5 percent, to close at $42.80.

Drillers such as Diamond Offshore Drilling, Atwood Oceanics and Noble also fell after being hit by analyst downgrades. Diamond Offshore dropped $2.72, or 4.6 percent, to $56.49. Atwood gave up $1.85, or 7.1 percent, at $24.16. Noble fell 53 cents, or 1.9 percent, to $27.20.

Not all oil services companies lost ground, as some investors looked to pick up values. Cameron International gained $1.15, or 3.5 percent, to close at $34.10. Halliburton rose 22 cents to close at $23.02, and Baker Hughes added 11 cents to close at $38.18.

(This version CORRECTS writethru sequence.)