Libyan investors target 'bargain value' BP shares

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The Independent Online

Libya's sovereign wealth fund should invest in beleaguered BP, the North African country's leading oil executive said yesterday, following reports over the weekend that several Middle-Eastern investors are also preparing to plough money into the group.

BP, which is under enormous pressure to stem the oil leak in the Gulf of Mexico, following the explosion on its Deepwater Horizon drilling rig in April, refused to comment on remarks by Shokri Ghanem, the chairman of Libya's National Oil Company.

"BP is interesting now with the price lower by half and I still have trust in BP. I will recommend it to the LIA [the Libyan Investment Authority]," Mr Ghanem said. "I think that BP shares are good value for bargain hunters."

The group is facing huge potential liabilities as a result of the crisis. Some estimates put the eventual bill at $60bn (£39bn). It has already announced a number of measures designed to reassure markets and the US Government.

"We don't comment on rumour and speculation and until we receive a direct approach about investment, these reports remain rumour and speculation," a spokesman said. "We have announced plans to divest $10bn (£6.6bn) worth of assets over the next 12 months, but there are no plans to issue new equity. We do welcome new shareholders and those increasing their stake."

Under pressure from the US administration, BP has agreed to scrap its latest dividend and set up a $20bn escrow fund to deal with initial claims. Reports from the Middle East suggest that the company has also been trying to garner support among investors in the region for an equity boost.

BP is understood to be keen on a deal similar to one struck by Barclays in the midst of the financial crisis. The bank agreed to a major investment from International Petroleum Investment Company, which is controlled by Sheikh Mansour bin Zayed al-Nahyan, a member of Abu Dhabi's ruling family.

BP has large interests in Libya and is known to have a strong relationship with officials in the country. The Qatari Investment Authority, which has recently invested in a number of UK assets, including the Harrods department store, has also been mooted as a potential investor in BP, as has the Kuwaiti sovereign wealth fund.

"With the cut in the dividend and capex, and the announced asset sales, the market assumed that BP was set to meet the $20bn fund it now has to set up, so the news about raising equity, or a bond deal, does come as something as a surprise," David Hart, an analyst at Westhouse Securities, said. "But it is good news for the company if it can get access to both equity and debt financing. Equity funding would, of course, have no effect on gearing and the idea of a key cornerstone investor from the Gulf is probably a good one."

BP's share price yesterday recovered some of the ground it has lost. The embattled company has lost about half its value since the explosion on the Deepwater Horizon, which killed 11 workers. An estimated 60,000 barrels of oil a day are now leaking into the Gulf of Mexico, and lapping up on the shores of states in the southern US.

The crisis has led to speculation about a hostile bid from a number of BP's rivals, including Royal Dutch Shell. Many analysts expect that the crisis will also lead to the ousting of the chief executive Tony Hayward.

The need for extra financing for the group became clearer yesterday when BP said that it has so far spent more than $3bn on the effort to stem the leak and to settle initial claims.

The company's latest plan to stop the leak, after a series of failed attempts, is to remove oil from the sea's surface using a giant ship known as a skimmer.