BP Plc and Anadarko Petroleum Corp. are leading a rebound in global energy stocks after engineers stopped the worst oil spill in U.S. history.
BP, owner of the Macondo well in the Gulf of Mexico that exploded on April 20, has gained 36 percent this quarter and partner Anadarko has surged 56 percent. They are the biggest gainers among oil companies in the Morgan Stanley World Index, making energy the second-best performing industry in the period.
Cement was pumped into the top of the well last week after a 40-foot (12-meter) stack of valves halted the flow in mid-July and about 75 percent of the 4.9 million barrels of oil spilled has evaporated, dispersed or been recovered, according to government estimates. At the height of the crisis in June, scientists predicted a worst-case scenario where Macondo could gush until the end of year, sending costs toward $100 billion and jeopardizing the future of offshore drilling.
“It wasn’t as catastrophic as it might have been, and that bodes well for all the negative sentiment in this hazardous industry,” said Jason Kenney, an analyst at ING Wholesale Banking in Edinburgh, who rates BP a buy. “The worst-case scenario for BP was really overdone. The risk is to the upside from here, quite significantly.”
BP fell to 296 pence on June 25, a 55 percent plunge from its pre-spill price, on concern liabilities from the accident risked bankrupting the company. It has since recovered 46 percent, to close 432.75 pence at the close of trading at 4:30 p.m. in London. Of 41 analysts covering the company and tracked by Bloomberg, 28 rate the stock a buy, 11 a hold and two a sell.
Anadarko, which holds a 25 percent stake in the well, followed the same pattern. Shares in the Woodlands, Texas-based company dropped 53 percent to a low of $34.54 on June 9. It closed last week at $55.68.
Mitsui & Co., the Japanese trading house that holds an indirect stake in the Macondo well, has advanced about 15 percent in Tokyo this quarter. The shares slumped 33 percent after the accident to a low of 1,018 yen on July 5, and closed little changed at 1,196 yen today.
“Now the well is capped and most of the oil is gone, it’s clear that the end of the world didn’t happen,” said Christine Tiscareno, an analyst at Standard & Poor’s in London. “This was scary for Anadarko because they’re much smaller. If they hadn’t been able to stop the oil flow, it could have put them into receivership.”
The end of the leak has added impetus to other oil and gas stocks as anxiety about harsher global regulation and soaring drilling costs has eased. Chevron Corp., the second-largest U.S. oil company has gained 16 percent this quarter. Royal Dutch Shell Plc is up 7.5 percent.
A rising oil price is also providing support to energy stocks. Benchmark crude futures in New York rose to more than $80 a barrel last week for the first time since May as investors bought commodities amid a rebound in the global economy.
“At least Macondo happened at a time when oil prices have stabilized at a high level and the asset market is good,” said Peter Hutton, head of research at NCB Stockbrokers Ltd. in London.
BP’s program of field sales may also be buoying the share price. The company’s incoming chief executive officer, Robert Dudley, is committed to selling as much as $30 billion of assets to pay compensation to victims of the spill. Disposals agreed on so far show BP is getting a premium.
The $7 billion sale of fields in the U.S., Canada and Egypt to Apache Corp. got about $19 a barrel of proved reserves, according to Barclays Capital. The deal puts the total value of BP’s assets at about $350 billion, the company said, compared with a market value of $130 billion today.
“Once BP opens up discussions about assets, they are able to tease out a lot of interesting offers,” NCB’s Hutton said. “They should easily hit their target.”
Anadarko’s eventual liability from the spill is unclear because it has said BP’s actions at the well “likely represent gross negligence or willful misconduct.” If proven, that may exempt the company from paying its share of fines and claims.
“It’s become clear that the liquidity of both BP and Anadarko should be sufficient to handle the cost of the cleanup,” said Scott Hanold, an analyst at RBC Capital Markets in Minneapolis, who rates the U.S. company “outperform.”
There is still “a bit of overhang” with Anadarko because of the company’s dispute with BP over liability, he said.
Mitsui’s unit, MOEX Offshore 2007 LLC, hasn’t paid $480 million in bills from BP for cleaning up the spill, and “will study and determine whether or not to pay,” any more bills, Mitsui’s Chief Financial Officer Junichi Matsumoto said Aug. 3.
Mitsui owns 70 percent of Mitsui Oil Exploration Co., which holds 10 percent of the field where the Macondo well is located through wholly owned U.S. subsidiary MOEX Offshore, according to the website of Mitsui Oil.
BP is drilling a relief well to ensure that the leak at Macondo is shut for good. That would cement the faulty well at the bottom, complementing the seal at the top. The operation is expected to be completed by the middle of the month.
The company took a $32.2 billion charge against the cost of cleaning up the leak and paying fines and compensation. That may yet rise if the company is found guilty of gross negligence, increasing the size of fine it must pay for pollution.