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BP Shares Fall as US Steps Up Pressure in Spill Fiasco

Wednesday, 09 June 2010 11:54 AM

BP's stock price tumbled Wednesday as it faced more U.S. government and congressional scrutiny over its handling of the massive Gulf of Mexico oil spill.

Interior Secretary Ken Salazar told a congressional hearing that BP's latest effort to try to contain the oil gushing from its deep-sea well may have increased the flow of crude 4 to 5 percent above what it was before.

The oil spill, which began on April 20, is causing an ecological and economic disaster along the U.S. Gulf Coast.

Coast Guard Admiral Thad Allen, who is leading the government relief effort, told reporters that BP planned to move another rig to the spill site on June 14. This would enable the company to boost its capacity to collect oil from the ruptured well to 28,000 barrels, or 1.18 million gallons a day, he said.

Government scientists have estimated that the leak spews 12,000-19,000 barrels a day, with one estimate as high as 25,000 barrels. They are due to present revised estimates later this week or early next week.

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

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 U.S. history.

Obama said 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.

BP's American depositary shares last traded down about 2 percent in early Wedneday trading. 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.

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

The captured oil is being channeled to a containment vessel on the surface above, where it is stored for later processing at a refinery ashore. Allen said the vessel was nearly full and was offloading its oil to a tanker.

Testifying at a Senate hearing on safety issues in off-shore oil development, Salazar confirmed earlier fears that BP's new containment system may have made the spill worse by increasing the flow rate. Government scientists had warned of a possible 20 percent increase.

"The rate of increase may have been somewhere between 4 and 5 percent over what it was before," Salazar said.

The disaster threatens fishing and tourism, two of the cornerstones of the local economy along the U.S. Gulf Coast.

The spill has already 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.

In a further sign of the Obama administration's pressure on BP, Allen demanded that London-based BP provide more information and transparency on how it was meeting damages claims by individuals and businesses affected by the spill.

"The BP Deepwater Horizon oil spill is having a devastating impact on the environment and the economy of the Gulf Coast states and their communities," Allen said in a June 8 letter to BP.

"The Federal Government and the public expects BP's claims process to fully address the needs of impacted individuals and businesses," Allen said.

BP has paid out close to $50 million in damages claims so far along the Gulf Coast—mostly to fishermen, shrimpers, oystermen and boat operators who say their livelihoods have been impacted by the spill. BP's total bill from the spill so far, including cleanup costs, has reached $1.25 billion.

On the corporate front, BP shareholders would prefer to sacrifice the company's Chairman Carl-Henric Svanberg rather than CEO Hayward over the ongoing crisis, the Times of London reported in its Wednesday edition.

Citing an unidentified person close to BP, the Times said shareholders had more confidence in Hayward's ability to supervise BP's response to the crisis than Svanberg, who has been largely invisible. A BP spokesman dismissed the report.

All of this is taking place against the backdrop of rising public anger and an unfolding ecological catastrophe.

U.S. weather forecasters gave their first confirmation Tuesday that some of the oil leaking from BP's well has lingered beneath the surface rather than rising to the top.

Undersea oil depletes the water's oxygen content and threatens marine life like mussels, clams, crabs, eels and shrimp.

It was the first government confirmation of undersea oil near BP's one mile deep ruptured well.

But a BP executive continued to play down the reports of subsurface oil. "We have not found any significant concentration of oil below the surface," BP Chief Operating Officer Doug Suttles told ABC's "Good Morning America."

BP said it had collected 14,800 barrels of oil from its blown-out well on Tuesday. That brings the cumulative total for five days to more than 57,000 barrels.

But the ultimate solution to the leak lies in the drilling of a relief well and that won't be completed before August.

© 2019 Thomson/Reuters. All rights reserved.

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BP's stock price tumbled Wednesday as it faced more U.S. government and congressional scrutiny over its handling of the massive Gulf of Mexico oil spill. Interior Secretary Ken Salazar told a congressional hearing that BP's latest effort to try to contain the oil gushing...
Wednesday, 09 June 2010 11:54 AM
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