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LONDON (Reuters) - Shares in London-based BP Plc
fell 7 percent on Thursday after the oil major said a leaking well in the Gulf of Mexico was gushing at five times the rate initially thought.
Investors are growing increasingly concerned about the impact of the leak. Since the Deepwater Horizon drilling rig caught fire, BP's shares have fallen 11 percent, knocking around $20 billion off its market capitalization.
"It could have a material impact on the company's financials," one fund manager said.
The drop is despite the company reporting much better than expected first quarter results on Tuesday.
BP's shares traded down 6.8 percent at 582 pence at 1516 GMT, lagging a 1 percent drop in the STOXX Europe 600 oil and gas index.
As happened in previous days, the biggest share price drop came after markets opened in the United States where BP also has a listing.
BP said the clean-up operation was costing it $4 million a day, although this is likely to increase sharply if the slick hits land.
BP could face much higher costs from potential lawsuits, punitive damages and reputational damage, which would hit its ability to grow output in the United States, its most important market.
The clean-up team, which includes the U.S. Coast Guard and other agencies, began a controlled burn on parts of the slick on Wednesday, to try and limit the amount of oil that looks set to hit the shore.
Eleven workers are missing and presumed dead after the worst oil rig disaster in almost a decade.
Swiss-based Transocean Ltd's Deepwater Horizon rig sank on April 22, two days after it exploded and caught fire while it was finishing a well for BP about 40 miles southeast of the mouth of the Mississippi River.
Five thousand barrels of oil are leaking a day, up from an earlier estimate of 1,000 barrels.
Underwater robots failed to activate a cutoff valve on the ocean floor to stop the leak. BP is hoping a plan to cover the well with a steel cap and capture the leaking oil will avert an environmental disaster.
However, this will take four weeks to put in place, by which stage over 150,000 barrels could have been spilled.
If the steel cap does not work, BP will have to rely on stemming the flow by drilling a relief well, which would take two to three months.
By this stage, the spill could be over 300,000 barrels - larger than the 258,000 barrels leaked by the Exxon Valdez in the U.S.'s worst oil spill to date.
However, a BP spokesman said the environmental damage from and cost of tackling the leak from the Macondo well would not be in the same range as the Exxon Valdez tragedy, which happened close to shore in the narrow Prince William Sound in Alaska.
Exxon spent $3.5 billion cleaning up the Valdez spill and had hundreds of millions of dollars in damages awarded against it.
The fact the Macondo spill can be treated offshore and that the oil involved is light, rather than the heavy crude the tanker Valdez carried, should reduce the environmental damage.
Additional reporting by Blaise Robinson; Editing by David Holmes