BP shares in free fall
26 June 2010
BP Plc stock on Friday fell more than 8 per cent in London and New York amid speculation that the company may have to seek extra funds to pay for its oil spill costs, hitting a 14-year low.
BP plans to nearly double next week its capacity for siphoning oil gushing from its ruptured deep-sea well, but a looming storm is raising fears the effort could be disrupted for days or weeks. BP and the US government nervously watched as an approaching low-pressure system over the western Caribbean Sea gathered strength.
Work on the drilling of relief wells, designed to stop the leak, is continuing.
BP stock hit a 14-year low on Friday and its credit weakened sharply on talk it needs extra cash to fund the clean-up and compensation bill for the oil spill. Total share losses for the embattled oil major since the ecological disaster began on April 20 stand at around $100 billion, more than half its pre-spill market value, and analysts at Nomura said it needed to assure the market of its liquidity.
"A heavy inversion of both credit yield and equity volatility suggests the market is concerned about a near-term credit event around BP," they said in a note. "With debt expensive and asset sales taking time, we consider that equity-linked financing - perhaps backed by sovereign wealth - could prove the attractive short-term solution," they added.
A spokesman for BP - whose chief executive, Tony Hayward, is currently on a UK investor roadshow - said it had "considerable firepower" to meet the costs and denied market talk that the company was seeking bankruptcy protection. BP's London shares, which earlier hit a low of 296 pence a share, pared losses slightly but were still down 5.2 per cent at 308.3 pence by 1154 GMT, while five-year credit default swaps were 40 basis points wider at 575, according to Markit.