Shell Shares Plummet On Oil Spill Fears

There is a knee-jerk reaction when the words “oil spill” and “Gulf of Mexico” come together.

We saw it first hand this week as shares in Royal Dutch Shell dropped 4% in early trading in London on Thursday after the company said it had sent a spill response vessel to a possible area in the Gulf of Mexico.

Traders said that the fall in shares obviously was a result of Shell's announcement that a vessel and also an aerial surveillance team was sent to investigate a 1-mile by 10-mile oil sheen that was reported near one of its platforms “out of prudent caution.”

The company said in a statement that the source of this oil sheen was unknown and there was no indication that it originates from the wells in either of its Mars or Ursa projects.

The vessel sent to the area is The Louisiana Responder, a large oil spill response vessel with skimming and boom capabilities.

Shell claims that it's actions were justified even with no wrong-doing. They said its “priority is to respond proactively, safely, and in close coordination with regulatory agencies.”

Apparently that is suitable, even at the hands of losing shares and terrifying stock holders that remember BP's disastrous oil spill in the Gulf of Mexico back in 2010.

The traders' response by Shell's share price reflected (and rehashed) the concerns and memories in that BP spill, which was the worst offshore oil spill in U.S. history.

From the Telegraph,

RBC Capital said in a note responding to the news."While the extent of the sheen, reported at 1 mile by 10 mile, is large and will be a concern, the sheen is light and could result from volume of only a couple barrels ...

"We would expect a very efficient response in GoM (Gulf of Mexico) from Shell - if it can show the source is not theirs, and the response is swift, Shell may even turn it into a positive live exercise."

Even two years later, BP still struggles from that fateful 2010 accident. Just before it's annual meeting in London, where it will make its latest attempts to put the Gulf of Mexico oil spill nightmare in the past, BP shares fell 2%. The company hopes to move forward and change the impression it's left on the Gulf coast region, as Shell has slid into the area and taken control of BP's mishandling of the oil spill situation.

But this does not necessarily mean that Shell is in the clear, as this recent oil spill fright shows, traders have a keen eye on any news coming from offshore in the Gulf of Mexico. It looks as though their mentality toward Shell's oil drilling in the region is: “if it's happened once, doesn't mean it can't happen again.”