BP fights for its future as US probes oil spill
BP was fighting to secure its future today as the US government launched a criminal and civil investigation into the Gulf of Mexico oil spill.
US Attorney General Eric Holder announced the probe into the disaster after the oil giant suffered its biggest one-day shares fall for 18 years.
Shares plunged by as much as 17% at one stage yesterday, before settling around 13% lower – wiping £12bn off its market value.
The stock tumbled into the red after BP’s latest attempts to block the leaking oil well proved unsuccessful and amid mounting fears over the ultimate financial toll on the company.
Launching the investigation which will involve the FBI, Mr Holder said: “We will closely examine the actions of those involved in the spill. If we find evidence of illegal behaviour, we will be extremely forceful in our response.”
Though he would not specify which companies or individuals might be targeted, BP’s actions are expected to come under intense scrutiny.
One analyst said the relentless oil leak – the worst in US history – has the potential to “break BP” if the well is not brought under control soon.
BP’s “top kill” operation to cap the well with mud and other debris proved unsuccessful over the weekend and the company is now working on using robot submarines in the latest move to stem the flow of oil.
But this technique has never been used before and it is far from certain that the procedure will work, potentially leaving BP with no other option than to drill relief wells – which could take until August to complete.
BP admitted yesterday that the total cost of the response had reached $990m so far.
However, the cost to BP could be more long-term, with the risk of tough punitive action from the US government and reputational damage, according to experts.
Dougie Youngson, oil analyst at Arbuthnot, said: “This situation has now gone far beyond concerns of BP’s chief executive Tony Hayward being fired, or shareholder dividend payouts being cut – it’s got the real smell of death. This could break BP.”
He added: “Given the collapse in the share price and the potential for it to fall further, we expect that it could become a takeover target – particularly if its operating position in the US becomes untenable.”
BP’s dramatic shares slump sparked a wider plunge on the FTSE 100 Index yesterday, although the market pulled back from the worst of its falls thanks to positive early trading on Wall Street.
The group is a major constituent of London’s Footsie, accounting for around 7% of the entire index, meaning that each 10p change in its share price moves the FTSE 100 by nearly 9 points.
Some market analysts believe the shares fall has been an over-reaction, although the group’s stock market troubles are unlikely to ease until the well has been brought under control.
Its stock market misery also spells bad news for many of Britain’s pension funds, which invest heavily in BP shares.
So far the group has lost around a third of its market value – some $58bn - since being thrown into turmoil after the Deepwater Horizon rig exploded and sank on April 20, killing 11 workers.
The spill has dumped between 18 and 40 million gallons into the Gulf, according to US government estimates.
Oil has been spewing from the well at a rate of 12,000 to 19,000 barrels a day.
BP has tried and failed five times to stop the well flowing.
Its next move involves deploying remote-controlled submarines to carry equipment and cut small pipes 5,000 feet (1,524m) below the surface of the water, ahead of placing a containment cap over the leak. This new attempt, which began on Sunday, should take four days to complete.
But BP said the plan is complex and success is not assured.
BP’s chief operating officer Doug Suttles said at the weekend: “We’re confident the job will work but obviously we can’t guarantee success.”
Its near-one billion dollar clean-up bill so far includes the cost of containment, relief well drilling and grants to the Gulf states.
The company said yesterday that around 30,000 economic injury claims had been filed and more than 15,000 payments have already been made – totalling about $40m.
The group has also received more than 110,000 calls to its helplines.
BP said that, as well as the failed top kill operation, it is continuing to drill two relief wells at around 13,000ft (3,962m) below the seabed in an attempt to cut off the flow of oil, but these are expected to take three months to complete.
America’s previous worst oil spill was the 1989 Exxon Valdez disaster, in which a tanker ran aground in Alaska, spilling nearly 11 million gallons.
BP’s clean-up efforts are being scrutinised closely by President Barack Obama’s administration amid increasing frustration at the environmental damage being caused.
Mr Obama yesterday met the co-chairmen of an independent commission he set up to investigate the spill and vowed to reform offshore drilling regulations to prevent a repeat of the disaster.
On Friday, Mr Obama toured oil-hit areas in Louisiana, saying he would “do whatever it takes” to help those affected.
He said additional manpower would lay more booms, clean beaches and monitor stricken wildlife.
Around 20,000 people have already been deployed to contain and clean up the spill.
Mr Obama also ordered BP to pay doctors’ fees for any “ill-effects” caused by the oil crisis.
Speaking yesterday about latest preparations to cap the leak, BP chief executive Mr Hayward said: “BP’s priority is to keep as much oil as we can from causing additional harm to the Gulf, the shoreline and the people of the region.
“This planned multi-step containment strategy is our best option for achieving this as we work hard towards completing the relief wells that will kill this well completely.
“I hope we will see progress with these containment procedures in the coming days.”
