Hurricane damage drags BP shares and FTSE down

Shares in UK oil firm BP helped to drag the London stock market into the red today after a hurricane apparently damaged one of its new rigs in the Gulf of Mexico.

Stock in BP, which is the UK’s biggest quoted company and accounts for about 10% of the value of the FTSE 100 Index, fell nearly 2% this morning.

The drop contributed to a 26-point fall in the blue chip index and flew in the face of rises in the price of crude, which have lifted oil shares significantly in the last year.

Analysts said investors were concerned that any damage to the new rig, called Thunder Horse, may delay BP’s plans to start pumping oil from it at the end of this year.

BP confirmed that the platform, which is 150 miles south east of New Orleans, had been found listing yesterday morning after Hurricane Dennis passed through the area at the weekend. The platform was leaning over an estimated 20-30 degrees.

The company said it had evacuated the rig on Friday before the hurricane struck and no-one was hurt.

It said it planned to investigate the cause of the incident, which is unknown, with the US coastguard.

A spokesman said: “We don’t know what caused this and that’s one of the first things we intend to find out.”

BP is setting up Thunder Horse, three other rigs and a pipeline development in the deep water Gulf of Mexico as part of a 15 billion US dollar investment in the area this decade.

The spokesman said the Gulf was one of six areas in which the company expects “significant growth” in production in the next four to five years, although he declined to give figures.

BP currently produces more than 300,000 barrels of oil equivalent per day in the area – about 7.5% of the group’s total daily production.

The spokesman said it was too early to say whether the incident would delay the start of oil production on Thunder Horse, which is expected to produce 250,000 barrels of oil equivalent a day in a couple of years’ time.

BP is looking for average growth in volumes of 5% each year between now and 2008.

Oil industry analyst Jonathan Copus at Investec said the Thunder Horse incident was likely to have caused the initial drop in BP’s shares today, although the sector was generally weak, with rival Shell also losing ground.

Thunder Horse and the other new rigs in the Gulf were an important element of BP’s future growth and the biggest ultra-deep water project in the area, Mr Copus said.

“If this gets delayed too far into 2006, there will be an impact on production growth next year,” he said.