Once again deep value investors vie for the claim they are not only consummate relative value stock pickers (in a time when implied correlation is at all time highs, making relative value as dead a concept as the dodo), but underwater geologists too. At least that was the case until last night, when it was uncovered that (at least one more) seepage near the BP well site may be leaking oil, methane and who knows what else uncontrollably, potentially confirming the running thesis proferred by Matt Simmons that leaks are prevalent and not localized to just the Macondo well. Reuters follows up: "Investors fretted about possible seepage from BP's capped Gulf of Mexico well on Monday and speculation grew about assets the company may sell to pay multibillion dollar costs for its oil spill. A BP spokesman said the seep was detected by its engineers but it was unclear whether the source was the blown-out well, adding that seeps were a natural phenomenon in the Gulf." The stock has sold off appropriately, now that BP trades as a "distressed catalyst" story, with any given day seeing the shares going up or down by double digit percentage. How this stock is still pitched as a relative value play is mindboggling, when one adverse piece of news could send it materially lower.
More from Reuters:
Analysts said investors were concerned about reports of the seepage, though any updates on a more permanent relief well to kill the leaking well were more important.
"There's been a lot of punting around the stock," said Richard Griffith, oil analyst at Evolution Securities, adding that would likely be continued volatility.
"The only thing that really matters is the relief well. If the relief well doesn't work, they will have a massive problem," he said.
National Incident Commander Admiral Thad Allen said in a statement that he had sent a letter to BP stating there were a number of unanswered questions about the monitoring systems it committed to as a condition of the U.S. government extending the well integrity test.
He listed detection of a seep near the well and the possible observation of methane over the well. He said he had authorized BP to continue the integrity tests for another 24 hours.
The BP spokesman said that if a seep is confirmed from the well, the cap will be lifted and oil flowed to the surface.
Of course, should the well be unblocked, the rage in the GoM coastal areas, which have recently seen a brief respite from the ongoing gusher, will be unprecedented, which explains the unwillingness of both the administration and BP to step back to a previous level in the operation:"There's been a lot of punting around the stock," said Richard Griffith, oil analyst at Evolution Securities, adding that would likely be continued volatility.
"The only thing that really matters is the relief well. If the relief well doesn't work, they will have a massive problem," he said.
National Incident Commander Admiral Thad Allen said in a statement that he had sent a letter to BP stating there were a number of unanswered questions about the monitoring systems it committed to as a condition of the U.S. government extending the well integrity test.
He listed detection of a seep near the well and the possible observation of methane over the well. He said he had authorized BP to continue the integrity tests for another 24 hours.
The BP spokesman said that if a seep is confirmed from the well, the cap will be lifted and oil flowed to the surface.
Carol Browner, Obama's top energy adviser, said in an interview on ABC's Good Morning America program: "If anything changes we can move rapidly to open parts of the cap and release the pressure in the event that is necessary."
She added: "Nobody wants to do that. Absolutely not... Clearly we want this to end but we don't want to enter into a situation where we have uncontrolled leaks all over the Gulf floor."
Unfortunately Carol, that is precisely the impression the administration is creating. She added: "Nobody wants to do that. Absolutely not... Clearly we want this to end but we don't want to enter into a situation where we have uncontrolled leaks all over the Gulf floor."
BP's troubles continue:
BP's role in the disaster and speculation about any influence the British oil giant may have had over the release of the Lockerbie bomber from a Scottish prison last year are sure to be discussed when British Prime Minister David Cameron meets Obama in Washington this week.
BP has confirmed that it lobbied the UK government in late 2007 over a prisoner transfer agreement with Libya but said it was not involved in talks on the release of Abdel Basset al-Megrahi, convicted of the 1988 bombing of a Pan Am flight.
British foreign secretary William Hague said on Saturday that there was no evidence BP had any connection with al-Megrahi's release.
Cameron's visit comes at a time when U.S. lawmakers are considering a range of new rules that could require tougher safety regulations on offshore drilling or bar companies like BP from new offshore exploration leases.
As we pointed out, the UK has been buying hundreds of billions of US debt. Assuming this is not just a Chinese bidding offshore operation, or a Fed shadow monetization facility, the UK suddenly has a lot of leverage over the US so any discussions between Cameron and Obama should be interesting. BP has confirmed that it lobbied the UK government in late 2007 over a prisoner transfer agreement with Libya but said it was not involved in talks on the release of Abdel Basset al-Megrahi, convicted of the 1988 bombing of a Pan Am flight.
British foreign secretary William Hague said on Saturday that there was no evidence BP had any connection with al-Megrahi's release.
Cameron's visit comes at a time when U.S. lawmakers are considering a range of new rules that could require tougher safety regulations on offshore drilling or bar companies like BP from new offshore exploration leases.
Yet the biggest issue is how to deal with a potential major disappointment for millions of potential voters, should it be uncovered that not only does the cap have to come off, but that the seepages are becoming problematic.
U.S. authorities probing the spill are looking into why workers missed signs of an impending explosion and have drawn up a list of more than 20 anomalies in the crew's response to them, the Wall Street Journal reported.
The current plan had been for BP to resume siphoning the oil after the completion of the pressure tests on the well, which extends 2.5 miles under the seabed, to judge if it is able to withstand the process to seal the leak.
But Doug Suttles, BP's chief operating officer, said the company now hopes to keep the damaged well shut until the relief well is completed in August and the leak is sealed off with heavy drilling mud and cement.
"We're hopeful that if the encouraging signs continue that we'll be able to continue the integrity test all the way to the point that we get the well killed," he told reporters before Allen issued his statement. "Clearly we don't want to reanimate flow into the Gulf if we don't have to."
Suttles' statement could indicate diverging viewpoints between BP and the U.S. government on plans for the well integrity test. It prompted Allen -- who will ultimately make the final call on the test -- to issue a statement that "nothing had changed" in the joint plan.
Billy Nungesser, president of Plaquemines Parish in Louisiana, said the new cap was good news after a three-month losing battle to try to clean up oil hitting fragile marshlands as more lapped ashore.
"We're very optimistic," Nungesser told the "Fox News Sunday" program. "We see light at the end of the tunnel. It's a very long tunnel but today we're making progress."
We hope Obama is not doing a teleprompted press conference in Plaquemines Parish when the brand new optimism once again turns to realism.The current plan had been for BP to resume siphoning the oil after the completion of the pressure tests on the well, which extends 2.5 miles under the seabed, to judge if it is able to withstand the process to seal the leak.
But Doug Suttles, BP's chief operating officer, said the company now hopes to keep the damaged well shut until the relief well is completed in August and the leak is sealed off with heavy drilling mud and cement.
"We're hopeful that if the encouraging signs continue that we'll be able to continue the integrity test all the way to the point that we get the well killed," he told reporters before Allen issued his statement. "Clearly we don't want to reanimate flow into the Gulf if we don't have to."
Suttles' statement could indicate diverging viewpoints between BP and the U.S. government on plans for the well integrity test. It prompted Allen -- who will ultimately make the final call on the test -- to issue a statement that "nothing had changed" in the joint plan.
Billy Nungesser, president of Plaquemines Parish in Louisiana, said the new cap was good news after a three-month losing battle to try to clean up oil hitting fragile marshlands as more lapped ashore.
"We're very optimistic," Nungesser told the "Fox News Sunday" program. "We see light at the end of the tunnel. It's a very long tunnel but today we're making progress."
http://www.zerohedge.com/article/new...king-investors
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