Shares in U.K.-listed oil giant BP PLC (BP) rose to a six-month high Tuesday following reports that compensation payouts for the Gulf oil spill may be much lower than expected and lingering rumors that the company is a takeover target.
Shares in U.K.-listed oil giant BP PLC (BP) rose to a six-month high
Tuesday following reports that compensation payouts for the Gulf oil spill may
be much lower than expected and lingering rumors that the company is a takeover
target.
After having one of the worst years in its history in 2010 because of the huge
oil spill in the Gulf of Mexico, BP shares soared on the first trading day of
2011, adding as much as GBP5.1 billion ($7.9 billion) to the company's market
value. At 1301 GMT, the company's shares were up 5.6%, or 26 pence, at 491
pence.
The oil sector in general had a good start to the year thanks to strong oil
prices, with most of BP's European peers seeing share price increases of
between 1% and 3%. Larger movers Tuesday included Tullow Oil PLC (TLW.LN),
which was up 4%, and BG Group (BG.LN), which jumped 3.2%.
While takeover rumors about BP are generally "spurious," good news
about the size of the compensation bill for the spill will encourage investors
who were already taking a more optimistic view of the size of BP's ultimate
liability for the disaster, said Panmure Gordon analyst Peter Hitchens.
Kenneth Feinberg, the lawyer administering BP's $20 billion compensation fund,
told Bloomberg Television Friday that just $10 billion may be enough to
compensate economic victims of the spill.
"It remains to be seen, but I would hope that half that money would be
more than enough to pay all the claims," Feinberg told Bloomberg. BP has
already paid out around $2.7 billion in compensation from the fund to over
170,000 people affected by the spill, Feinberg said.
The fund will also be used to cover cleanup costs. Feinberg said $20 billion is
"ample" for both compensation and cleanup.
BP still faces tremendous uncertainty over the size of the fines it will have
to pay for the spill, which are not covered by the fund, said Hitchens. More
clarity on the scale of this liability should emerge within the next six months
as the U.S. Department of Justice concludes its investigations, he said.
U.K.
newspaper The Daily Mail reported Monday that Royal Dutch Shell PLC (RDSB.LN)
considered and rejected the idea of buying BP last summer. Shell's board
decided against a bid because of the huge uncertainty of BP's liabilities for
the spill, the paper said citing an unnamed source. Shell remains interested in
the prospect of a merger with BP, but would not be the first mover, it added.
Rumors of a takeover of BP have been rife since the Gulf oil spill wiped away
more than half its market value last summer. In addition to Shell, ExxonMobil
Corp. (XOM) is also commonly cited as a potential suitor.
"I would rule out a takeover," of BP by Shell, Hitchens said. In
addition to the uncertainty over liabilities for the spill, "a merger
between Shell and BP would end up with all sorts of monopoly problems...in
places like
Germany
they
would be getting towards 50% market share," he said.
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