Spill fear spooks Shell investors but stock rebounds

Stock Market Predictions

(Global Markets) - What's a barrel of oil worth these days?

If you ask the investors of Royal Dutch Shell (RDSa.L), the figure could be nearly $2 billion per barrel.

Investors in London lopped off roughly $12 billion in Shell's market value on Thursday morning after reports of oil in the water around Shell's Gulf of Mexico operations. Later Shell said the oily sheen spotted on Wednesday totaled about 6 barrels.

Shell shares quickly rebounded in London from their 5.4 percent slide - roughly $11.6 billion of the company's $220 billion market value - as fears of a major oil spill abated. The U.S.-listed shares (RDSa.N) closed about 0.2 percent higher.

The oil sheen appeared to be dissipating by Thursday afternoon, Shell said, and the company was "very confident" that its operations were not to blame.

But reaction to the sheen, which spread over a 10 mile by 1 mile area, showed how nervous oil investors become over reports of possible oil spills.

"They're certainly very jittery, to say the least," said analyst Phil Weiss of Argus Research.

Oil company investors have grown increasingly sensitive to production accidents since BP Plc's (BP.L) Macondo disaster two years ago in the Gulf of Mexico, which erased more than 50 percent of the company's value in the weeks after the spill.

"Clearly it gives every investor pause. Everyone reacts to what burned them last," said Mark Coffelt, president of Empiric Advisors and portfolio manager of the Empiric Core Equity Fund (EMCAX.O), which owns shares in Exxon Mobil (XOM.N)

That spill, the worst offshore oil accident in U.S. history, prompted a temporary moratorium on new drilling in the deepwaters of the Gulf, and the industry is only now returning to pre-spill activity levels there. BP's total costs for that disaster could reach $40 billion.

"I think the scrutiny is certainly greater in the post-Macondo world. And with greater scrutiny comes a greater reaction," said Weiss.

Shell's U.S. peer Chevron Corp (CVX.N) saw its shares decline 12.5 percent in the weeks after a more modest 3,000 barrel oil slick was discovered in November near its well off Brazil's coast.

Its shares have largely recouped those losses, despite a lawsuit brought by a Brazilian prosecutor seeking as much as $11 billion in damages and criminal penalties for some Chevron workers.

For Shell, the pullback in its share price seems to have had a silver lining. The company announced that it had repurchased and canceled 980,000 "B" shares bought through an independent third party at 2121.32 pence, a price not seen in more than six months.

(Reporting By Matt Daily. Editing by Patricia Kranz and M.D. Golan)