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BP shares jump after stock offering ruled out

By Ben Rooney, staff reporter


NEW YORK (CNNMoney.com) -- BP rallied Tuesday after the company said it has no plans to issue new shares to cover costs related to the oil spill in the Gulf of Mexico.

The stock also got a boost from a report suggesting that Libya's sovereign wealth fund may invest in the oil giant.

In the United States, depository shares of BP jumped 8.7% to $31.91 on the New York Stock Exchange. In London, the stock gained 5%.

Shares of BP have plunged roughly 50%, erasing about $90 billion of market value, since the April 20 explosion on a drill rig operated by the British oil company uncapped a well deep below the surface in the Gulf of Mexico.

"We have no current plans to issue new equity," said BP spokesman Robert Wine. "If new or existing investors wish to increase their stake, then we would of course welcome that."

The statement eased concerns that BP would have to issue new stock, which would dilute the value of existing shares, to help pay for cleanup costs and economic damage related to what has become the worst oil spill in U.S. history.

BP said Monday that it has spent more than $3 billion on spill-response since the well began leaking thousands of gallons of oil per day into the water.

The stock was also supported by comments from a Libyan official suggesting the nation's sovereign wealth fund may invest in BP.

"BP is interesting now, with the price lower by half," Shokri Ghanem, chairman of Libya's National Oil Company, told the Wall Street Journal. "I still have trust in BP."

According to the Journal, Ghanem plans to recommend that Libya's sovereign wealth fund, the Libyan Investment Authority, purchase shares of BP.

BP (BP) declined to comment on the report.

Meanwhile, analysts at the Royal Bank of Scotland upgraded shares of BP to 'Buy' from 'Hold' and estimated that the cost of the disaster will be lower than what the market is currently pricing.

"We doubt that total direct and indirect costs of the spill to BP will be as large as currently discounted in its share price," the RBS analysts wrote in a report.

In addition, RBS said the drilling of a relief well, designed to kill the ruptured well, could be done earlier than forecast.

On Monday, BP reiterated that it expects work on both of its two relief wells to be done in August. However, based on the latest drilling data from BP, analysts at RBS say one of the relief wells could be done as soon as July 14. To top of page

Index Last Change % Change
Dow 17,409.72 269.48 1.57%
Nasdaq 4,691.87 97.43 2.12%
S&P 500 2,036.09 35.55 1.78%
Treasuries 1.46 0.00 0.07%
Data as of 6:56pm ET
Company Price Change % Change
Bank of America Corp... 12.70 0.52 4.27%
Freeport-McMoRan Inc... 10.69 0.56 5.53%
Ford Motor Co 12.39 0.23 1.89%
Apple Inc 93.59 1.55 1.68%
Citigroup Inc 40.44 1.96 5.09%
Data as of 4:03pm ET
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