BP poised to "kill" Gulf well as SEC probes trading

WASHINGTON/HOUSTON (Reuters) - U.S. regulators are investigating insider trading in shares of BP Plc, including whether BP employees profited illegally from its Gulf of Mexico oil spill, a move that may hurt the energy giant’s efforts to restore investor confidence.

Details of the probe emerged as BP prepared to deliver the first of what it hopes will be two knockout blows to “kill” its ruptured Macondo well, 105 days after it started spewing millions of gallons of oil, causing an environmental disaster.

The full extent of the disaster was given added clarity on Monday when U.S. government scientists refined estimates of how much oil had flowed into the Gulf of Mexico from the well.

The Flow Rate Technical Group and a team of scientists with the U.S. Department of Energy say 4.9 million barrels of oil have been released. The flow rate was put at 62,000 barrels a day at the start of the spill in late April.

That rate dropped to 53,000 barrels a day immediately before the well was sealed on July 15, the group said.

Investors will scrutinize these figures closely as BP’s final costs may be tied to how much oil is estimated to have flown into the Gulf from the spill.

They will also closely follow the insider trading probe.

Two sources familiar with the preliminary Securities and Exchange Commission probe said the alleged insider trading took place after the start of the BP oil spill on April 20.

At issue is whether people illegally profited from trading on non-public information at BP. Investigators are also looking at whether the company properly disclosed information on risks related to its deepwater Gulf operations, one source said.

BP did not return calls for comment, but the investigation comes as the British company is trying to rehabilitate its image and tamp down public anger in the United States over its handling of the spill, the worst in U.S. history.

“BP can do no right by anybody and the U.S. government today -- it’s not surprising they’re trying to throw the whole book at BP for anything they can,” said Robert Lutts, president, chief investment officer at Cabot Money Management.

STATIC KILL

But Lutts said investors were focused on BP’s planned “static kill” on Tuesday, when it plans to inject drilling mud into the top of the well to push oil back where it came from -- a reservoir 13,000 feet/ beneath the seabed.

BP’s stock gained ground in New York, climbing 2.5 percent in afternoon trading, despite news of the SEC investigation.

“The stock has rallied since they may finally have a ‘cap’ to their problems. Now if we get a permanent fix, shareholders will be much more pleased going forward,” Lutts said.

Energy shares had a strong rally, fueled by optimism over BP’s plans and a 3 percent jump in crude prices. Companies linked to the Macondo oil field rallied, with Transocean Ltd up 9.6 percent to $50.68. The Philadelphia exchange oil services sector index climbed 4.5 percent.

The White House said it was “cautiously monitoring” the situation as BP engineers, mindful of previous setbacks to permanently seal the well, conducted final tests that will show whether BP can move to finally kill the well.

The testing was delayed Monday while BP repaired a small valve leak on the rig that will be used in the static kill.

The top U.S. official overseeing the spill response, retired Coast Guard Admiral Thad Allen, said the kill would take 33-61 hours to complete.

“I think everybody would like to have this thing ended as soon as possible,” Allen said.

To ensure the ruptured well is permanently sealed, BP will also proceed with its plans for a relief well that will intersect the damaged well and pump more heavy drilling mud and cement in from below to plug any openings.

Kent Wells, BP’s senior vice president of exploration and production, said the company expected the relief well to intercept the blown-out well between August 11-15.

MONTHS-LONG NIGHTMARE

A permanent seal to the well would end the months-long technical nightmare that began in April with an explosion on the rig that killed 11 workers and triggered the leak.

But even when the well is finally capped, the environmental disaster will be far from over and its political and financial implications will reverberate for years.

Gulf communities are still counting the costs after the forced the closure of large swaths of rich fishing grounds and the blow dealt to tourism by the spill.

BP managed to put a tight-fitting cap on the well two weeks ago that temporarily stopped the flow of oil into the ocean.

But investors are looking for a permanent fix to a disaster that has cost the company billions of dollars in cleanup costs and left it facing numerous lawsuits.

“When they say BP has permanently killed the well, I think BP is pretty much a good buy,” said Mark Coffelt, chief investment officer at Empiric Advisors in Austin, Texas.

Coffelt said investors were still concerned about how much the spill will ultimately cost BP, which has already announced plans to sell $30 billion in assets over the next 18 months.

If BP’s effort to cap the well is successful, it would also be good news for President Barack Obama, who has seen his public approval rating slip in recent months, partly because of voter dissatisfaction over his handling of the spill.