BP shares slump to 14-year low

BP shares slump to 14-year low


Shares in beleaguered oil major BP (BP-) slumped to a 14-year low on Friday morning, after the costs for its catastrophic Gulf of Mexico oil spill hurtled past the $2.3 billion mark.


The group's shares dropped as much as 7%, making it the worst performing stock on the FTSE 100 index.


Clean-up costs for what has become the worst oil spill in US history have now totalled $2.35 billion, significantly up on the $2 billion figure cited just four days ago. It follows BP's agreement to set up a $20 billion claims fund over the next three and half years, following intense pressure from the White House.


The steep cost includes $126 million already paid out in claims since disaster struck on the Deepwater Horizon drilling rig two months ago. To date, almost 74,000 claims have been filed and more than 39,000 payments made.


The US government has heaped pressure on BP, which has lost its status as Europe's largest oil company, after a series of failed attempts to halt the oil leak. Scientists have estimated that oil could be gushing at a rate several times higher than the official 5,000 barrel a day estimate published by BP.


As the US government seeks to secure public approval, BP has been dragged into a legal battle between the White House and a Louisiana state judge regarding the six-month deepwater drilling moratorium in the Gulf of Mexico.


The Obama administration hit a snag on Thursday when Judge Martin Feldman refused to postpone his earlier decision to lift the ban, after hailing it too broad.


The government has since appealed to the US Court of Appeals in order to overturn Feldman's decision.


Meanwhile, BP continues to plough ahead with efforts to stem the leak and said to date, the total volume of oil recovered or flared by its containment system is around 364,500 barrels.


Despite a setback on Wednesday, when the lower marine riser package containment system was suspended following a leak, the company said it was continuing to make preparations for the next step in containment operations.


Work on the first floating riser containment system is progressing and on schedule to begin around mid-July, while work on the two relief wells remains underway, with the first already successfully detecting the ruptured MC252 well.


However, there are mounting fears that BP could suffer further setbacks due to tropical storms brewing, which could affect the eastern Gulf of Mexico, close to where its clean-up operations are in full swing.


Westhouse Securities attempted to put a positive spin on events: "BP is flirting with the 300p level and my caution remains, although today's news isn't actually that bad and the fact that the relief well has detected the well bore on MC252 is good news. Perhaps the market is listening to the weather forecast."


BP's shares are trading below USD 29.

source: iii.co.uk