Thursday 21 June 2018

BP shares plunge, US threatens new penalties

Louisiana, June 10, 2010

The markets were closely eyeing British energy giant BP's stock price on Thursday after it plunged to a 14-year low in US trading on concerns about the costs of the giant Gulf of Mexico oil spill.

President Barack Obama's administration, getting tough as polls show public disapproval over its handling of the worst oil spill in US history, has threatened new penalties on the company, further sapping investor confidence in the British oil giant.

A fresh round of congressional hearings into the disaster were scheduled on Thursday as BP sought to capture more of the oil gushing from its ruptured undersea well.

BP's latest containment effort, which follows a series of earlier failed attempts, involves placing a containment cap with a seal on a deep-sea pipe from which the oil is gushing.

It said on Wednesday it was capturing more of the oil though the exact flow rate remains unknown.

BP depositary shares trading in New York fell nearly 16 per cent to close at $29.20 on Wednesday, their lowest level since August 1996, on jitters about the costs the company will have to assume. BP said last week it has plenty of cash to deal with the problem and the Obama administration has made similar comments.

With Wednesday's battering in New York, BP has lost more than half its market value since the crisis began on April 20 when the deepsea well ruptured and the Deepwater Horizon rig exploded, killing 11 workers and unleashing a torrent of oil.

Earlier on Wednesday, BP's stock closed down 4 per cent in London on concerns the company might have to suspend its dividend payment. US politicians have been calling for this, saying the company should put its cash into paying for legal claims and environmental damage in the Gulf.London's opening.

"I don't know what's going to happen with the London shares tomorrow (Thursday)," said Jon Burnham, the CEO of Burnham Securities. He said he had BP shares until Monday when he sold them.

"Monday, we sat around here in the office and I decided we'd had enough. But I didn't know it was going to do what it's done in the last two days," he said.

"Nothing has changed"

A BP spokesman said "nothing has changed" since Friday and restructuring experts agreed that by running the numbers alone, BP looked able to handle the financial damage. But such confidence has not been evident in the market.

The company is under siege on multiple fronts as the spill spreads, threatening an ecological catastrophe in the Gulf.

"It seems that shares are under pressure from the fear of whether BP can survive. It is not just a rumor about the potential of a dividend cut in BP anymore. Now it's about the survivability of the company," said Jon Najarian, a founder of Web information site in Chicago.

US Interior Secretary Ken Salazar told a Senate hearing he would ask BP to repay salaries of any workers laid off because of the six-month moratorium on deepwater exploratory drilling imposed by the US government after the spill.

As the US government turned up the heat on the British oil major, a BP source said the company believes it may be heading for a showdown with the White House over widening liability demands.

While the company has said it will pay for the clean-up and direct damages to those affected by the spill, the moratorium was a government decision and costs related to it were a different matter, the source said.

A senior US Justice Department official said after the markets closed that the department was "planning to take action" to ensure BP had enough money on hand to cover spill damages.

Robert Stark, a bankruptcy attorney with Brown Rudnick in New York, said he expected BP to be running models right now to determine how they would pay their liability claims.

"It's a very big company with a very big balance sheet ... in the pure economic world of bankruptcy, do they have enough money to pay their debts? I don't think any of us know that for a fact. At least in the short term they have capability to pay," he said.

There were visible signs of anger in southeastern Louisiana, where fishing bans are taking a heavy toll on the local economy.

At Maw's Sandwich and Snack Shop in Boothville, Louisiana where french fries smothered in gravy are on the menu, a poster reading, "Obama Needs A Lesson In Leadership And Compassion" was tacked to the side of the building.

Another poster read, "Jindal 4 President," a reference to Louisiana's popular governor, Bobby Jindal, a conservative Republican who has hammered Obama and BP over their response to the unfolding disaster.

Images of oiled pelicans and other wildlife is further stoking public anger with both the government and BP.

A report released on Thursday by conservation group Oceana said that as of Tuesday, 36 oiled sea turtles have been found in the Gulf of Mexico and more than 300 additional sea turtles have been found dead or injured since the spill began April 20.

"While scientists have not yet determined the cause of death for many of these turtles, this number is higher than usual," it said. It also noted that many of the dead or injured turtles would not wash up on beaches and so likely would never be found. – Reuters

Tags: BP | Shares | Gulf of Mexico | Louisiana | Penalties | Oils pill |


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