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:
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:
Unfortunately Carol, that is precisely the impression the administration is creating.
BP’s troubles continue:
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.
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.
We hope Obama is not doing a teleprompted press conference in Plaquemines Parish when the brand new optimism once again turns to realism.
Originally posted here:
New BP Seepage Spooking Investors
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