BP Seeks New Oil Spill Options

The oil major's efforts to stop the leak into the Gulf of Mexico have suffered a setback

Catharina Milostan 10 May, 2010 | 4:04PM
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BP's efforts to stop oil leaking into the Gulf of Mexico from the Macondo well suffered a setback over the weekend when the company's larger oil-containment dome became clogged with methane hydrate crystals that had formed. The firm is reviewing new options including deploying its second, smaller dome with a design to help reduce the impact of the methane hydrate crystals and an option to plug the blowout preventer. This extends BP's recovery efforts from weeks to months as work continues to drill two relief wells to intersect and plug the Macondo well. These $100 million relief wells could take two to three months to complete.

BP said it has spent more than $350 million to combat the spill, higher than it had originally estimated. Our model already assumed potential oil recovery costs to exceed the earlier $6 million per day estimate for 90 days, and we do not anticipate changing our 651p per share fair value estimate at this time. We also assumed environmental clean-up along shorelines, payment of lost business, and exposure to regulatory and legal liabilities could reach or exceed $4 billion. Regulatory and legal liabilities could take years to resolve. Given the continuing uncertainty behind timing and effectiveness of BP's measures to stop the oil flow, our estimates remain fluid.

Catharina Milostan is an equity analyst with Morningstar.

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Securities Mentioned in Article

Security NamePriceChange (%)Morningstar
Rating
BP PLC392.70 GBX1.06Rating

About Author

Catharina Milostan  Catharina Milostan is a stock analyst with Morningstar.

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