BP shares in focus after US doubles spill estimate4 min read . Updated: 11 Jun 2010, 11:38 AM IST
BP shares in focus after US doubles spill estimate
BP shares in focus after US doubles spill estimate
Houston: Shares in British energy giant BP will be in the spotlight again on Friday after US government scientists doubled their estimate of the amount of oil gushing out of its ruptured Gulf of Mexico well.
The Wall Street Journal reported the British oil company was considering deferring or reducing its second quarter dividend to help quell the political uproar in the United States over the environmental disaster caused by the massive spill.
The news that the flow rate may be as high 40,000 barrels (1.68 million gallons/6.36 million liters) per day came after US market closed on Thursday.
BP shares closed 6.65% down in London at 365.50 pence while in New York they rebounded from 14-year lows to end 12.3% higher at $32.78.
Worries over BP’s dividend payments have contributed to severe pressure on the company’s stock, including a dive to 14-year lows in US trading on Wednesday.
US politicians have called on BP to suspend its dividend and divert cash to cover the cost of cleaning up the spill as efforts to plug the blown-out undersea well failed.
“We are considering all options on the dividend. But no decision has been made," BP Chief Executive Tony Hayward told the Wall Street Journal.
The newspaper said BP could cut or defer the dividend due to be announced on July 27, or pay all or part of it in an I.O.U. to shareholders.
The White House said on Thursday that President Barack Obama had invited BP chairman Carl-Henric Svanberg to the White House next Wednesday to discuss the spill.
BP has come under increased pressure from the Obama administration in recent days and on Thursday British Prime Minister David Cameron said Britain stood ready to help the British company deal with the spill.
Speaking during a visit to Afghanistan, Cameron said he would take up the matter with Obama when they speak in the next few days. It was the first time Cameron made a public comment about the spill.
The spill, already the worst in US history, is much bigger than many had thought.
US scientists said on Thursday that between 20,000 and 40,000 barrels (840,000 and 1.7 million gallons/3.2 million and 6.4 million litres) of oil flowed from the well before 3 June, when BP’s remotely operated robots sawed through an underwater pipe to clear the way for a capping procedure.
US Interior Secretary Ken Salazar told a congressional panel on Wednesday that the cut may have increased the rate by 4 to 5%.
Based on a rate of 40,000 barrels per day, the stricken well could have spewed as much as 2 million barrels (84 million gallons/317 million of liters) of oil since it ruptured on 20 April -- eight times the amount that the Exxon Valdez spilled into Prince William Sound in Alaska in 1989.
BP says it has collected 73,324 barrels (3.1 million gallons/11.7 million litres) of oil since installing the capping system.
“The latest estimates confirm that the BP Deepwater spill is the worst environmental disaster in US history. Even if BP were to shut off the flow today, this crisis is just beginning," said John Hocevar, the Oceans Campaign Director for Greenpeace USA.
“These new findings underscore the fact that neither BP nor their allies in government can be trusted to speak objectively about the spill," he said.
The new estimates, in which BP had no input, could have huge financial implications.
“Any EPA (Environmental Protection Agency) fines would be on a per barrel basis, so the new numbers would not be good for any company held responsible," said one oil analyst based in New York who declined to be named.
Under the Clean Water Act, BP and others could be exposed to fines up to $4,300 for every barrel leaked into the gulf, according to legal experts and official documents.
The wide variation in the estimates in the flow rate points to the difficulty in estimating a flow that is 1.6 kms beneath the surface and reachable only by remotely operated robots.
BP says it is capturing more of the torrent of oil that has gushed from the sea bottom since the 20 April rig explosion that killed 11 workers and set the disaster in motion.
But the almost 16,000 barrels it said on Thursday it had collected in the previous 24 hours was triple its initial estimates of the leak’s flow rate, a point that will not be lost on critics as US public and political anger mount.
As the spill spread, heavier concentrations of oil began washing up on Florida seashores late on Wednesday. Until then, debris from the spill had been limited in the state to relatively small tar balls.
The Obama administration has kept up the heat, saying it would make sure BP paid all damages and cleanup costs from the spill, which has soiled 120 miles (190 km) of coastline and threatens lucrative fishing and tourist industries.
Images of oiled pelicans and other wildlife is further stoking public anger with both the government and BP.