BP shares plunge over 9 percent on oil spill fears

BP turns to financial advisors, denies bankruptcy rumors
NEW YORK, June 14, 2010 (AFP) - BP has tapped financial advisers at Goldman Sachs, Blackstone Group and Credit Suisse as pressure mounts on the British energy giant over the devastating Gulf of Mexico oil spill, US media reported Monday. A BP spokesman denied the reports, saying the group did not want to reveal "who are our advisors and on what they are advising us." "There's no truth that we have hired bankers with a defense mandate," he added. A person close to the matter confirmed that BP had hired Blackstone financial advisers, but spokespeople for Goldman Sachs and Credit Suisse did not immediately respond to questions for comment.

The New York Times said on its website that BP had brought in the advisers to study how to handle the firm's "mounting liabilities" nearly two months into the massive spill caused by a ruptured well deep underwater on the seafloor. As complaints and lawsuits pile up against the company, President Barack Obama's administration has also turned the screws on BP, demanding that it not only pay to clean up the Gulf Coast's fragile shorelines but also compensate local workers for loss of employment related to the catastrophe. US oil spill creates disaster for companies: Moody's
New York (AFP) June 14, 2010 - The BP oil spill in the Gulf of Mexico has unleashed a disaster for the companies with operations there, credit rating agency Moody's said Monday. "The massive, continuing oil spill in the Gulf of Mexico has created an unprecedented financial, legal, regulatory and environmental crisis for the companies that operate there," Moody's Investors Service said in a new report. "The accident could have an international impact as well, as other governments that oversee offshore production adopt these new, stricter US standards." Moody's noted the US government's six-month moratorium on deepwater drilling in the Gulf of Mexico was set to last through November 2010. The moratorium was posing uncertainties that could last well beyond this date for producers, drillers and service companies operating in the region, said Steven Wood, a Moody's managing director.

"We believe it could take up to two years before producers, rig operators, and service firms in the deepwater Gulf can resume activity to pre-spill levels," Wood said. The rating agency also pointed out that US lawmakers were considering major changes on liability issues in the wake of the April 20 explosion on the BP-leased Deepwater Horizon rig that sank two days later. The accident killed 11 workers and has unleashing the worst environmental disaster in US history. "Congress is considering a measure that would lift or remove liability caps for deepwater producers, which could lead some companies in the Gulf to re-evaluate whether to continue operating there," Moody's said. Possible changes in US policy on deepwater drilling could also slow down the permitting process and make it more expensive, the agency said, highlighting that risk particularly for smaller producers.

"Overall, small producers that rely wholly or heavily on offshore drilling to replace declining reserves could face proportionally large declines in production, and could be the most at risk for negative rating actions," according to the report, "Gulf Oil Spill to Have Far-Reaching Impact on the Oil Industry." For the major offshore drillers, the credit-rating risk was likely to be more "muted" due to their ability to do business in different regions.

by Staff Writers
London (AFP) June 14, 2010
BP shares plunged more than nine percent on Monday as investors fretted over the spiralling cost of the Gulf Mexico oil spill crisis and the future of the group's shareholder dividend.

BP's share price tumbled to 355 pence amid mounting pressure from US President Barack Obama over the group's handling of the worst-ever environmental disaster in US history.

Visiting spill-hit areas, Obama said he hoped for an outline deal with BP by Wednesday on a multi-billion dollar fund for oil disaster victims, and vowed to use all his power to heal the Gulf coast.

"My hope is that by the time the (BP) chairman and I meet on Wednesday that we've made sufficient progress that we can start actually seeing a structure that would be in place," he said at a staging post for oil clean-up efforts.

BP directors earlier met in London to discuss the cost of sorting out the disaster, which had jumped to about 1.6 billion dollars (1.3 billion euros), and whether to suspend a dividend payment to shareholders.

Reports have suggested that BP will bow to massive US pressure and decide to suspend the payments as its potential liability over the oil spill soars.

"Some investment firms are fearing that the dividend will be scrapped," said Rajesh Patel, head trader at financial betting firm Spread Co.

"BP's board are discussing what to do with their dividend this afternoon and it is a massively important decision for investors whatever they decide," Patel said.

"It looks though like some (investors) have decided that enough is enough with BP."

A BP spokesman told AFP that no formal announcement on the dividend was due on Monday.

New York-listed BP shares also fell heavily, ending the day down 9.7 percent.

Ahead of the board meeting, BP said that "the cost of the response to date amounts to approximately 1.6 billion dollars, including the cost of the spill response, containment, relief well drilling, grants to the Gulf states, claims paid, and federal costs."

The figure is up from an estimated 1.43 billion dollars announced by BP on Thursday. BP's market value has fallen by tens of billions of dollars as its share price plunged after the BP-operated Deepwater Horizon rig sank on April 22.

The accident, following an explosion that killed 11 people two days earlier, sparked an enormous spill from a leaking well on the sea bed, with huge amounts of oil washing up on the US Gulf coastline, threatening precious wildlife and local communities.

BP said in Monday's statement that "work continues to collect and disperse oil that has reached the surface of the sea, to protect the shoreline of the Gulf of Mexico, and to collect and clean up any oil that has reached shore."

US Coast Guard Admiral Thad Allen, in charge of the US response to the Gulf oil spill disaster, said Sunday that he expected BP chief executive Tony Hayward to attend a White House crisis meeting due Wednesday.

Allen said issues at the top of the agenda would include oil spill containment options and the claims process for victims.

Obama's political opponents have piled criticism on the president for his failure to so far meet, or talk by telephone with Hayward, who has become the public face of the disaster for BP.

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Obama tours disaster zone to set stage for national address
Theodore, Alabama (AFP) June 14, 2010
US President Barack Obama labeled the Gulf oil spill an environmental 9/11 and made a fourth disaster zone trip Monday while aides strong-armed BP to set up a multi-billion dollar victim fund. The London-based energy giant's shares meanwhile slumped 10 percent, amid deep investor anxiety about the costs it will bear for America's worst ecological catastrophe and investor fears for the firm's ... read more

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