By Kristen Hays
HOUSTON (Reuters) - Drilling of a relief well seen as the most promising way to plug the BP <:BP.LO:>oil spill in the Gulf of Mexico is a week ahead of schedule, the U.S. official overseeing the spill response said on Tuesday.
But crews were still aiming to reach BP's blown-out well only in mid-August, Retired Coast Guard Admiral Thad Allen said on Tuesday, 78 days after an explosion on the Deepwater Horizon drilling rig killed 11 people and burst an oil well, now spewing up to 60,000 barrels of crude into the Gulf each day.
BP's shares rose nearly 9 percent in New York after the company said it could cover the costs of the spill without selling new shares, despite reports it was talking to government-owned funds in the Middle East about buying a stake to ward off takeover attempts.
The oil company's share boost -- its London shares also rose, partly supported by a brokerage upgrade -- came even as oil from the slick spread to Texas, the last U.S. Gulf state whose shores had been untainted by the environmental disaster.
The spill is wreaking havoc on coastal ecosystems, fishing communities and a tourist industry seen as especially important during a time of high unemployment. Vacationers largely avoided beaches tarred by the leaking well during the three-day U.S. July 4 Independence Day holiday weekend.
Investors said that barring other negative news, the stock may have found a floor with its closing price at $26.97 on June 25. Shares are up 16 percent since the close on that day.
"All the negative news on the stock has had its impact," said Kurt Wulff, president at McDep LLC, an oil and gas research firm in Needham, Massachusetts.
"We're optimistic that the news can get better from there. The talk about sovereign buyers may not lead to anything, but it certainly means that value-orientated investors are seeing opportunity."
At one stage during the spill, BP had lost $100 billion in market value.
TALKS WITH SOVEREIGN FUNDS
A source in the United Arab Emirates said on Tuesday that BP executives held talks with sovereign wealth funds in Abu Dhabi, Kuwait and Qatar, as well as one in Singapore, to find a partner who might help it avoid being taken over by another major oil company.
"BP is seeking a strategic partner so it doesn't get taken over by other major oil companies such as Exxon and Total," the source said.
BP declined to comment on talk of a stake sale. It did say there were no plans to issue new equity to anyone, allaying some investors' fears of a share issue to help pay for a spill expected to cost tens of billions of dollars. The company's bill for the spill has already passed $3 billion.
"We're always happy to welcome new shareholders or existing shareholders who wish to increase their holdings but there's no plans to issue new equity to anyone," a BP spokesman said.
A top 10 shareholder said any move to issue shares would be viewed extremely negatively.
"It will be a kind of suicide note -- people will turn up with flame throwers at management," the shareholder said.
GOOD INVESTMENT?
Several sovereign funds already hold BP stakes. Norway and Kuwait control about 1.8 percent each, China has 1.1 percent and Singapore 0.7 percent, according to Thomson Reuters data.
Royal Bank of Scotland upgraded BP to "buy" from "hold."
"Our base case scenario is significantly less pessimistic and in our view, the risk/reward profile of the shares is currently favorable," it said in a note.
Just two out of 37 brokers have an "underperform" or "sell" rating on BP's stock, and over two-thirds rate it "buy" or "strong buy," according to Thomson Reuters data.
The stock's 12-month forward price-to-earnings ratio makes it easily the cheapest among the major oil companies.
Britain's The Times newspaper reported the British government was drafting contingency plans for a possible BP collapse. The British government declined to comment.
Tests showed tar balls washed up on the Texas coast were from the spill, meaning every U.S. Gulf state -- Louisiana, Mississippi, Alabama, Florida and now Texas -- has been soiled by the largest offshore oil spill in the country's history.
Texas asked BP for a $25 million block grant to help fund its cleanup. BP has provided similar funds to other states that have had crude wash ashore and the credit rating agency Standard & Poor's said that money was keeping the spill damage from affecting the credit ratings of affected states.
The U.S. Coast Guard also reported an oily sheen and tar balls in the inland estuary of Lake Pontchartrain, which borders New Orleans.
On the site of the spill itself, attempts to stop the flow have not worked. BP has pinned hopes on the relief wells.
There was a chance disturbed weather over the southern Gulf of Mexico could strengthen into a tropical storm this week, the U.S. National Hurricane Center said.
Although it was not expected to travel over the site of the blown-out BP well, it could come closer than Hurricane Alex, which interrupted the cleanup operations last week. Alex was the first hurricane of what experts predict will be a busy season for tropical storms.
Coast Guard spokesman Commander Charles Diorio said on Tuesday that rough seas and high winds continued to hamper oil skimming operations.
Offshore skimming crews were unable to collect any oil-fouled water on Monday off the coasts of Alabama, Mississippi and the Florida panhandle, Diorio said on a conference call. And nearer to shore and inland, skimming crews had "collected a grand total of three barrels of oily water."
(Additional reporting by Matthew Bigg in Bay Jimmy, La., Raji Menon, Joel Dimmock, Tessa Walsh, David Brett and Sarah Young in London, Amena Bakr and Nicolas Parasie in Dubai, Tom Brown in Miami, Anna Driver in Houston and Ryan Vlastelica in New York; writing by Patricia Zengerle; editing by Kristen Roberts and Jerry Norton)
