CORRECTED - WRAPUP 1-Investors worry about seepage at capped BP well

Mon Jul 19, 2010 7:04am EDT

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(Corrects second paragraph in second block to BP lobbied the UK government, not the U.S. government)

* Shares fall 2.5 pct, off 40 pct since spill began

* BP: no comment on seepage, says has spent $3.95 bln

* Paper says may sell refineries, petrol stations

By Tom Bergin and Chris Baltimore

LONDON/HOUSTON, July 19 (Reuters) - Investors fretted about possible seepage from BP's (BP.L) (BP.N) 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.

BP shares, which have been rallying over the past three weeks, slipped 2.5 percent after the top U.S. government spill official said that engineers had detected seepage, suggesting there may be problems with the cap that stopped oil spewing into the water nearly three months after a rig explosion.

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 company said in a statement that it had spent $3.95 billion so far on efforts to tackle the well and that it aimed to permanently kill the well in the first half of August.

It said it continued to run an integrity test on the well, on which it placed a cap last week that appeared to seal the well and that pressure continued to rise.

BP choked off the flow a mile (1.6 km) under the water's surface with a cap on Thursday, marking the first time oil has not spewed since an April 20 explosion on an offshore rig killed 11 workers.

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," Richard Griffith oil analyst at Evolution Securities said, 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.

Late on Sunday, the U.S. government released a letter to BP Chief Managing Director Bob Dudley from retired Coast Guard Admiral Thad Allen that referred to an unspecified type of seepage near the mile-deep (1.6 km-deep) well along with "undetermined anomalies at the well head."

"I direct you to provide me a written procedure for opening the choke valve as quickly as possible without damaging the well should hydrocarbon seepage near the well head be confirmed," Allen wrote.

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For full spill coverage link.reuters.com/hed87k

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Insider TV link.reuters.com/hyr57m

Graphic on BP shares r.reuters.com/dez27m

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The BP spokesman said that if a seep is confirmed from the well, the cap will be lifted and oil flowed to the surface.

The worst oil spill in U.S. history has caused an economic and environmental disaster in five states along the Gulf Coast, hurt President Barack Obama's approval ratings and complicated traditionally close ties with Britain.

IN THE CROSSHAIRS

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 on Tuesday.[ID:nLDE66I0I8]

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.

The company, which has been in the crosshairs of U.S. politicians since the spill began on April 20, has started canvassing shareholders about a restructuring that could include a breakup of its businesses, the Sunday Times reported.

The paper said options included selling the group's refineries and petrol stations, scaling back its U.S. operations and ramping up in-house engineering instead of outsourcing.

Shares are off nearly 40 percent since the spill began despite a rally from lows hit on June 25. The recovery has been prompted by speculation of asset sales and sovereign wealth fund interest and hopes for the capping of the well.

ANOMALIES IN RESPONSE

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. [ID:nN18147158]

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 (4 km) 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."

In Boothville, Louisiana, where a sign on a roadside snack stand said "Thank you, Jesus, the well is capped," residents were happy but frustrated at the economic toll the spill is taking. (Additional reporting by Paul Eckert in Washington, Eileen O'Grady in Houston, Alexandria Sage in Louisiana; Writing by Sitaraman Shankar; Editing by Hans Peters)

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