By Tom Bergin and Ernest Scheyder
LONDON/VENICE, Louisiana (Reuters) - BP <:BP.LO:>Plc said the relief well to plug the oil spill in the Gulf of Mexico is on track and now has the blown-out well in its sights.
Concern over its ability to pay the rapidly escalating cost of the worst spill in U.S. history continued to weigh on its shares, however, sending its London stock to a 14-year low and further hitting its credit profile.
BP said in a statement on Friday the first of two relief wells had successfully detected the MC252 well and would continue to a target intercept depth of 18,000 feet, when "kill" operations would begin.
As concern grows that bad weather could hamper clean-up operations, BP said 37,000 people, 4,500 vessels and 100 aircraft were helping the response effort, and that almost 850,000 barrels of oil and "oily liquid" had been captured or burnt off the sea.
BP said, to date, clean-up and compensation costs for the ecological disaster, which has devastated the region, hit President Barack Obama's poll ratings and led to a contested ban on deepwater drilling, was $2.35 billion (1.58 billion pounds).
Concern the firm may need to raise extra cash to help fund the clean up pushed its shares to a 14-year low and pushed its credit default swaps wider.
Nomura analysts, in a note, said the perception of near-term credit risk was damaging BP and that it may have to assure the market it had enough funds to cap the well.
"With debt expensive and asset sales taking time, we consider that equity-linked financing -- perhaps backed by Sovereign Wealth -- could prove the attractive short-term solution," they said.
At 0947 GMT, BP shares traded in London were down 6.9 percent at 302.5 pence, after ending down 3.1 percent at $28.74 in New York, a new closing low for the year. Five-year credit default swaps, meanwhile, widened 19 basis points to 555 bps.
Late Thursday, data released by the New York Stock Exchange showed the short interest in BP's New York-listed stock had risen 290 percent in the first half of June, as more people bet the stock has further to fall.
MORATORIUM LOSS
The Obama administration was pursuing its legal options after a setback on Thursday when a judge refused to put on hold his decision lifting a ban on deepwater oil drilling imposed in response to the spill.
After striking down the moratorium on Tuesday, a federal judge in New Orleans rejected a request to allow the six-month ban to stand while the government appeals his decision.
Judge Martin Feldman issued an order denying the stay. The government has appealed to the U.S. Court of Appeals for the Fifth Circuit and can ask it to stay Feldman's decision.
The government imposed the moratorium after BP's well ruptured on April 20, unleashing millions of gallons of crude into the sea and killing 11 workers.
More generally, investors are concerned about the ultimate costs to BP as it faces more than 200 spill-related lawsuits and has agreed under political pressure to set up a $20 billion fund to pay damages to oil spill victims.
BP was forging ahead with its efforts to capture or burn off oil as it gushes from the well on the bottom of the sea.
WEATHER BREWING
Bad weather is also brewing in the region and could hamper the clean-up efforts.
A tropical wave over the western Caribbean Sea has a high chance of developing into a tropical depression over the next couple of days, the U.S. National Hurricane Centre and other weather forecasters said.
Most weather models see it hitting the coast near the Texas/Mexico border in a few days but some expect the wave to turn northeast towards Florida and the eastern Gulf of Mexico near where BP's clean-up operations are in high gear.
Any slowdown in clean-up efforts would heap more pressure on President Obama, who has faced criticism and falling poll ratings because of perceptions that his handling of the crisis has been slow.
"Obama better get off his ass and get something done," Billy Nungesser, president of Plaquemines Parish (county), told Reuters at a shrimp boil in Venice, a Louisiana fishing hub.
"He still has a chance to save this coast and his presidency," he said.
(Additional reporting by Scott DiSavino in New York; writing by Ed Stoddard and Simon Jessop; editing by Stacey Joyce and Sitaraman Shankar)
