BP shares drop to 296p before bouncing back. When will BP's crash end?
It's been 66 days since the Macondo oil spill, yet there seems no end in sight to the agony suffered by BP (LSE: BP) shareholders.
Oil's not well
The day before 20 April's tragic accident, BP's share price closed at 642.5p. At this level, the oil super-major was worth £120.7 billion. Since the environmental catastrophe in the Gulf of Mexico, BP's shares have headed steadily south, barring a few brief rallies along the way.
Alas, news that BP continues to struggle to contain leaks from the Macondo well sent its shares plumbing new depths this morning.
BP crashes through £3
Early on Friday morning, BP released the latest of its daily statements on the clean-up effort. So far, the firm has spent $2.35 billion (£1.58 billion) in an effort to limit oil-spill damage near the coast of Florida and Louisiana.
This latest update sparked another round of selling from BP shareholders worried about the ultimate cost of this nightmare. At one point, BP shares dropped below £3 to reach 296p, down 9%. At this level, BP was valued at a mere £55.6 billion, or less than half (46%) of its worth on 19 April.
As I write, BP shares have bounced back from their intra-day low and currently stand at 311p, down 4.4% on the day. Nevertheless, BP's share price is testing levels not seen since 1996, with its owners caught in a 'perfect storm' of a plunging share price and suspended dividends.
When will it end?
One worry is that BP will need to raise funds -- via an issue of corporate bonds -- in order to raise cash to help pay clean-up and litigation costs. Alas, credit-rating agencies have downgraded BP's debt, and five-year BP credit default swaps hit 5.55% early today, suggesting BP's creditworthiness continues to decline.
Then again, BP's market cap has crashed by an incredible £62.3 billion since this saga began, which must be more than the ultimate cost of this tragedy. To me, BP looks a blow-out bargain today, but I thought the same thing at £4, so what do I know?
That said, fear rules the waves at the moment and, with bad weather predicted for the days ahead, BP could fall yet further.
Finally, it seems madness for US legislators, regulators and pundits to continually savage BP. After all, with a quarter of BP shares owned by US institutions and a further 14% held by US individuals, nearly two-fifths (39%) of the company is owned by Americans. This is just 1% behind the 40% owned by British institutions and individuals.
Thus, Britain and the US are sharing this financial pain almost equally.
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