BP punished as shares hit 14-year low

Beleaguered oil giant BP took more stock market punishment today as shares collapsed to a 14-year low amid growing fears of a short-term funding crisis sparked by the Gulf of Mexico disaster.

As much as £5.5 billion was wiped off the under-fire oil giant as shares plunged 9% at one point to below 300p - levels not seen since August 1996.

BP rallied slightly but finished more than 6% down - the worst performer in the FTSE 100 Index. It has now seen its market value tumble by more than £60 billion since the Deepwater Horizon oil rig exploded on April 20, killing 11 workers.

Despite assurances over measures to improve the capture of oil and progress on relief wells to kill the flow, BP said clean-up costs had risen to 2.35 billion US dollars (£1.6 billion).

And insuring BP's debt for five years now costs 5.85% - meaning an investor holding £10 million in BP debt must pay £585,000 to protect itself against default, according to financial research firm Markit.

The cost of insuring for one year is higher at 7.25% - a clear signal of market worries over the immediate costs faced by BP which would make any debt funding move far more expensive.

Analysts at Nomura said a 10 billion dollar (£6.7 billion) funding injection from a major investor such as a Middle East wealth fund could shore up market doubts at a time when debt funding is dear and asset sales may take time.

The move would be similar to that made by Barclays at the height of the financial crisis in 2008, when the bank raised emergency capital from Abu Dhabi and Qatar to avoid taking taxpayer cash.

BP insists it is in a strong position to tackle the spill - generating 30 billion dollars (£20.1 billion) in cash a year, with 10 billion dollars in committed or stand-by banking facilities, planned asset sales of 10 billion dollars and around five billion dollars (£3.4 billion) saved from cutting the dividend.

But there are also worries over the approaching hurricane season in the Gulf, with reports of a potential storm next week that could hamper the response operation.

CMC Markets analyst Michael Hewson said: "With bad weather closing in it seems that BP continues to lurch from one crisis to another."

The group has so far captured around 364,500 barrels of oil through its containment system, but it is estimated around 35,000 to 60,000 barrels a day are continuing to pour from the well.

BP chief executive Tony Hayward officially handed over day-to-day control of the Gulf of Mexico crisis to BP board director Bob Dudley earlier this week as it set up a new division to manage the spill.

The group was reportedly planning a mammoth fundraising programme to shore up its finances as the clean-up bill soars.

As well as the ongoing cost of the operation and claims, it has also set aside a 20 billion dollar (£13.5 billion) compensation fund for those affected by the spill.

Mr Hayward is said to have told staff yesterday that operating results due out next month will be "very strong", although he recognised the group's need to sell assets and show balance sheet strength to deal with the liabilities.

Nomura said worries over short-term credit risk were "highly damaging" for BP, limiting its ability to fund at attractive rates as well as sell off assets at decent prices.

"We see pressure growing on the company to assure sufficient funding to cap the well," Nomura's Alastair Syme said.

Start your day with The Independent, sign up for daily news emails
Life and Style
love + sex A new study has revealed the average size - but does that leave men outside the 'normal' range being thought of as 'abnormal'?
Arts and Entertainment
The Palace of Westminster is falling down, according to John Bercow
voices..says Matthew Norman
Steve Bruce and Gus Poyet clash
Graham Norton said Irish broadcaster RTE’s decision to settle was ‘moronic’
Arts and Entertainment
Jake and Dinos Chapman were motivated by revenge to make 'Bring me the Head of Franco Toselli! '
arts + ents Shapero Modern Gallery to show explicit Chapman Brothers film
Arts and Entertainment
Kurt Cobain performing for 'MTV Unplugged' in New York, shortly before his death
music Brett Morgen's 'Cobain: Montage of Heck' debunks many of the myths
ebooksA special investigation by Andy McSmith
Life and Style
Brendan Rodgers
football The Liverpool manager will be the first option after Pep Guardiola
Amazon misled consumers about subscription fees, the ASA has ruled
Arts and Entertainment
Myanna Buring, Julian Rhind-Tutt and Russell Tovey in 'Banished'
TV Jimmy McGovern tackles 18th-century crime and punishment
Arts and Entertainment
Paul Whitehouse as Herbert
arts + ents
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Recruitment Genius: Sales Executive - OTE £40,000

£15000 - £18000 per annum: Recruitment Genius: This is a great opportunity for...

Austen Lloyd: Law Costs HOD - Southampton

£50000 - £60000 per annum + Excellent Salary: Austen Lloyd: An outstanding new...

SThree: Recruitment Resourcer

£20000 - £21000 per annum + uncapped commission: SThree: As a graduate you are...

Ashdown Group: Junior Application Support Analyst - Fluent German Speaker

£25000 - £30000 per annum + benefits: Ashdown Group: A global leader operating...

Day In a Page

Syrian conflict is the world's first 'climate change war', say scientists, but it won't be the last one

Climate change key in Syrian conflict

And it will trigger more war in future
How I outwitted the Gestapo

How I outwitted the Gestapo

My life as a Jew in wartime Berlin
The nation's favourite animal revealed

The nation's favourite animal revealed

Women like cuddly creatures whilst men like creepy-crawlies
Is this the way to get young people to vote?

Getting young people to vote

From #VOTESELFISH to Bite the Ballot
Poldark star Heida Reed: 'I don't think a single bodice gets ripped'

Poldark star Heida Reed

'I don't think a single bodice gets ripped'
The difference between America and Israel? There isn’t one

The difference between America and Israel? There isn’t one

Netanyahu knows he can get away with anything in America, says Robert Fisk
Families clubbing together to build their own affordable accommodation

Do It Yourself approach to securing a new house

Community land trusts marking a new trend for taking the initiative away from developers
Head of WWF UK: We didn’t send Cameron to the Arctic to see green ideas freeze

David Nussbaum: We didn’t send Cameron to the Arctic to see green ideas freeze

The head of WWF UK remains sanguine despite the Government’s failure to live up to its pledges on the environment
Author Kazuo Ishiguro on being inspired by shoot-outs and samurai

Author Kazuo Ishiguro on being inspired by shoot-outs and samurai

Set in a mythologised 5th-century Britain, ‘The Buried Giant’ is a strange beast
With money, corruption and drugs, this monk fears Buddhism in Thailand is a ‘poisoned fruit’

Money, corruption and drugs

The monk who fears Buddhism in Thailand is a ‘poisoned fruit’
America's first slavery museum established at Django Unchained plantation - 150 years after slavery outlawed

150 years after it was outlawed...

... America's first slavery museum is established in Louisiana
Kelly Clarkson: How I snubbed Simon Cowell and become a Grammy-winning superstar

Kelly Clarkson: How I snubbed Simon Cowell and become a Grammy-winning superstar

The first 'American Idol' winner on how she manages to remain her own woman – Jane Austen fascination and all
Tony Oursler on exploring our uneasy relationship with technology with his new show

You won't believe your eyes

Tony Oursler's new show explores our uneasy relationship with technology. He's one of a growing number of artists with that preoccupation
Ian Herbert: Peter Moores must go. He should never have been brought back to fail again

Moores must go. He should never have been brought back to fail again

The England coach leaves players to find solutions - which makes you wonder where he adds value, says Ian Herbert
War with Isis: Fears that the looming battle for Mosul will unleash 'a million refugees'

The battle for Mosul will unleash 'a million refugees'

Aid agencies prepare for vast exodus following planned Iraqi offensive against the Isis-held city, reports Patrick Cockburn