BP shares rally as crunch time looms for relief well effort

BP's shares rose almost seven per cent this morning on the back of reports that the company is poised to install a new capping system that would capture almost all the oil leaking into the Gulf of Mexico and speculation it could face a hostile takeover bid.

The company released an update on its work to tackle the spill this morning, confirming the cost of the clean-up and compensation effort has now reached $3.5bn (£2.3bn), not counting the $20bn the firm has pledged to pay into an independently managed clean-up and compensation fund.

However, it also said work was proceeding "as planned" to cap the leak using a new capping system capable of capturing 60,000 to 80,000 barrels a day.

The company said that it removed the original cap on Saturday afternoon and would this week install a "capping stack" that it hopes will contain the entire flow of oil.

If the work goes as planned, the temporary fix is expected to be completed in the next few days, effectively ending the flow of oil into the Gulf until the relief well operation can be completed.

The company said the high-stakes project to connect a relief well to the leaking well was also proceeding as planned and was on schedule to be completed by early to mid-August.

The update comes as speculation continues to mount about BP's long-term future.

The company is reportedly making progress with its planned asset sales, with sources indicating over the weekend that a number of potential buyers have been identified for assets that the company is looking to sell off to raise additional funds.

Senior managers at the company, including chief executive Tony Hayward, also spent much of last week in talks with a number of sovereign wealth funds as the company seeks to find a "white knight" investor who can protect it from hostile takeover bids.

However, the move has failed to quash speculation that a takeover bid is on the cards, with the Sunday Times reporting yesterday that the Obama administration has told US oil giant Exxon Mobil Corp and another group, believed to be Chevron, that it would not oppose a bid for BP.

Meanwhile, two of the investigations into the Deepwater Horizon spill are expected to move forward this week.

According to Reuters reports, the US Justice Department has begun interviewing witnesses as part of its criminal and civil investigation into the spill, while the Obama administration's independent commission on the disaster will hold its first public hearing in New Orleans later today.