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BP shares tumble as US probes Gulf oil spill

London, June 9, 2010

British energy giant BP's stock price tumbled on Wednesday as it faced more US government and congressional scrutiny over its handling of the massive Gulf of Mexico oil spill.

BP shares fell around 6 per cent in London, following a 5 per cent drop on Tuesday, on worries that the company will have to suspend its dividend payment under pressure from US politicians who say it should go to pay for legal claims and environmental damage in the Gulf.

The cost of protecting BP debt against default also rose sharply, with the five-year credit default swap widening 52.5 basis points to 312.5 basis points, three times higher than at the end of May, market data showed.

The disaster remains at the top of President Barack Obama's agenda, a point underscored by his strong comments and his plans to head back to the Gulf Coast next week to inspect operations to tackle the worst oil spill in US history.

Obama said on Tuesday that he would have fired Tony Hayward if the BP chief executive had worked for him because of Hayward's statements minimizing the impact of the spill.

The toughening rhetoric against BP and the call by some lawmakers for the company to cut its quarterly dividend has hit BP shares in recent days.

"People are resigning themselves to the fact that there may be a suspension of the dividend," said Tony Shepard, an oil analyst at brokerage Charles Stanley in London.

On Monday, Goldman Sachs predicted the oil giant could cut its dividend for two quarters. Until last week, most analysts said that BP was not likely even to reduce the dividend.

"We now think there is a 50 per cent probability BP will skip its upcoming quarterly dividend," Evgeny Solovyov, oil analyst at Societe Generale, said in a research note on Wednesday.

The company's American depositary shares trading in New York fell 2.3 per cent just after the opening bell. They were the third-most actively traded shares on the New York Stock Exchange.

The political drama in Washington and the drive in the Gulf to limit the environmental disaster were being watched closely by investors who have seen losses erase a third of BP's value.

In Washington on Wednesday morning, Interior Secretary Ken Salazar was scheduled to testify at a Senate hearing on safety issues in off-shore oil development, a day after his department issued stronger safety requirements that companies must meet to drill in waters less than 500 feet (152 metres) deep.

The slick has fouled wildlife refuges in Louisiana and barrier islands in Mississippi and Alabama. It also has sent tar balls ashore on beaches in Florida. One-third of the Gulf's federal waters remains closed to fishing and the toll of dead and injured birds and marine animals is climbing. – Reuters




Tags: BP | London | Shares | Obama | oil spill | US probe |

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