Business

Oil spill: BP shares slide as crisis continues

  • 10 June 2010
  • From the section Business

BP shares suffered another difficult day as the company continued to struggle with the fallout from the oil spill in the Gulf of Mexico.

The firm's shares closed down 6.6% in London, having earlier plunged 12%.

And the row over the spill has moved to Westminster - with calls for the UK government to try to ease relations between BP and the White House.

Prime Minister David Cameron will discuss BP with US President Barack Obama this weekend.

Mr Cameron said he understood Washington's "frustration" at the spill, adding that the UK stood ready to help BP with the clean-up - referring to 600 tons of chemical dispersant that have been made available.

Economic value

Meanwhile Chancellor George Osborne, who has spoken to BP chief executive Tony Hayward, said: "We are all concerned about the human and environmental impact."

He added that "constructive solutions" were needed, emphasising that people "remember the economic value BP brings to people in Britain and America".

The US is considering taking legal action to prevent BP paying dividends.

And concern has been expressed by MPs about the damage that such action could do to one of the UK's top companies.

However the UK government has played down fears expressed by some senior figures of "anti-British rhetoric" in the US.

The US state department has said the oil spill will not affect the relationship between the US and Britain.

'Very heavy price'

BP's shares recovered some of the losses during London trading hours to end 6.6% lower at 365.5 pence.

The recent price moves mean the oil giant's share price has almost halved since the Deepwater Horizon oil spill began on 20 April.

The company has come under increasingly sharp attack by some US politicians for its handling of the spill, described as the worst environmental disaster the US has faced.

Some of the sharpest comments have come from President Obama, who said he was looking for "ass to kick" at BP, and that he would have sacked BP chief executive Tony Hayward - if he worked for him - over flippant comments about the scale of the spill.

London Mayor Boris Johnson told the BBC that BP had paid a "very, very heavy price", and expressed concern that the oil spill was beginning to damage the entire image of the UK in the US.

"I do think there's something slightly worrying about the anti-British rhetoric that seems to be permeating from America," he told BBC Radio 4's Today programme.

However, UK Foreign Secretary William Hague has downplayed the extent of anti-British feelings across the Atlantic.

"No-one has used an anti-British tone in anything that I've detected," he told the BBC.

And Deputy Prime Minister Nick Clegg also played down the prospect of UK-US relations being damaged.

"It is about dealing with the ecological problem and dealing with it as soon as possible," he said.

However the former British ambassador to the US, Sir Christopher Meyer, told the BBC that the BP issue had become "a bit of a crisis, politically".

"The government must put down a marker with the US administration that the survival and long-term prosperity of BP is a vital British interest," he said.

He added that with nearly 40% of BP shares held in the US the company was "a pretty vital American interest too, fully integrated into US energy infrastructure".

And the remarks by President Obama prompted Royal Sun Alliance chairman John Napier to write an open letter to the president, saying criticism of the company lacked "balance" and was "unstatesmanlike".

He told the BBC: "The language and rhetoric of this dispute is going into the danger zone, is becoming too highly personalised and to that extent, the interpretation over here, not just by me but others, is that it has a certain anti-British rhetoric to it - and that has to be of concern."

Dividend fears

US Interior Secretary Ken Salazar said that BP should compensate other oil companies that have had to lay off workers because of a moratorium on deep sea drilling announced by President Obama in response to the Gulf of Mexico spill.

Meanwhile, the US Attorney General said he could not rule out taking action to force BP to withhold its next dividend payment - something which former Foreign Secretary Sir Malcolm Rifkind said was "quite intolerable".

The drop in BP's share price is already bad news for UK pension funds, which invest heavily in the firm.

The oil company has said that it pays £1 in every £7 of dividends that pension funds receive from FTSE 100 companies.

However the National Association of Pension Funds (NAPF) has insisted that BP's woes "should not have an immediate or serious impact on those saving into a pension, or on those who have retired".

It added that pension funds have shifted out of UK shares and that the average fund was now spread across many companies and many types of global asset.

US perceptions

In its latest update on the spill, BP sought to reassure investors that it was on a strong financial footing with a stronger-than-forecast cash flow.

It also said that the total actual cost to date was some $1.43bn (£1bn). This compares with a total of £55bn that has been wiped off BP's value since the spill began.

Market nerves have also been reflected in the value of BP's bonds, which now trade at levels comparable with junk-rated companies.

This is despite the company continuing to enjoy high "investment grade" ratings from all three major ratings agencies.

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