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BP's future cloudy with oil uncertainty

A boom floats in the water as contract workers from BP use skimmers to clean oil from a marsh near Venice, La.

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Kai Ryssdal:Shares of BP ended the day down $6.43 in New York, a drop just today of almost 15 percent. Since the leak in the Gulf of Mexico started six weeks ago, the company's lost more than $70 billion in market value, a third of what it was worth mid-April. You put that up against BP's known expenses so far -- almost a billion dollars in direct clean up costs to date -- and estimates that by the time all's said and done, the company could be looking at $20 billion or more in clean up and compensation, it seems fair to ask how, or if, BP weathers the storm.

Marketplace's Jeremy Hobson reports.


Jeremy Hobson: There are some analysts who say this could be a buying opportunity, that BP's stock market plummet is an overreaction.

Mark Gilman: This is the kind of thing that happens in an environment of considerable uncertainty.

Mark Gilman is an energy analyst at the Benchmark Company. He calls BP's stock excessively discounted -- despite spiraling costs to the company, from fines, cleanup charges and a growing number of lawsuits.

Pavel Molchianov, an energy analyst at Raymond James, says there's another big negative for BP.

Pavel Molchianov: Brand image, industry reputation, how people perceive the company. And just like Exxon was damaged in 1989 for many years, so BP is going to be damaged in terms of its reputation by what's happening right now.

But Exxon still exists -- in fact, it's bigger than BP. That could be why some stockbrokers think there's a light at the end of the tunnel for BP, and its stock will bounce back.

David Kotok, chief investment officer at Cumberland Advisors, is not so optimistic. He says the risk of owning BP stock remains very high.

David Kotok: My estimates are that we will measure the final cost in the tens of billions. If it gets into the catastrophe, where it's beyond the five-state region in the Gulf of Mexico, then BP could be gone.

In other words, BP's future may depend on whether the oil ends up being sucked into through the so-called "loop current." That warm water flow would drag oil around the tip of Florida and could plaster beaches along the eastern seaboard. So far, BP shareholders are hoping that's just a possibility.

In New York, I'm Jeremy Hobson for Marketplace.

Ryssdal: Attorney General Eric Holder was on the Gulf Coast this afternoon. He announced he's opening a criminal investigation into the spill. No specifics on companies or individuals the Justice Department's looking at.

About the author

Jeremy Hobson is host of Marketplace Morning Report, where he looks at business news from a global perspective to prepare listeners for the day ahead.

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