BP Shares Sink Amid Oil Spill Bankruptcy Chatter

Pelicans, dolphins and other wildlife may not be able to escape the oil leak in the Gulf of Mexico, but investors in the corporation responsible for it have stepped up their exodus.

Shares in BP plunged again today in London after yet another sell-off in New York Wednesday, wiping out more than $82 billion in value from the London-based oil and natural gas firm. BP, No. 5 in sales worldwide on Forbes list of biggest companies, has seen its fortunes collapse in the wake of the spill that is now in its 52nd day.

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Its shares have fallen more than 50 percent since the April 20 spill and there has been chatter about a possible bankruptcy filing by BP amid U.S. political pressure on the company to halt dividend payments and pay even more compensation for the Gulf of Mexico oil spill. That might be extended to include unemployment benefits for thousands of U.S. workers affected by the spill.

The stock had dropped as much as 11 percent at the London opening today, but closed down 6.7 percent, as analysts suggested the sell-off was overdone. That's a 13-year low for BP, which also trades in the U.S. as despositary shares. The U.S. shares, which plunged sharply Wednesday, traded higher in the afternoon today, partly on a positive report for energy demand that sent energy shares higher.

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The latest sell-off came after respected oil industry analyst Matt Simmons told Fortune Magazine that a bankruptcy filing was likely within a month. "They're going to run out of cash from lawsuits, cleanup and other expenses," he said.

"One really smart thing that Obama did was about three weeks ago he forced BP CEO Tony Hayward to put in writing that BP would pay for every dollar of the cleanup. But there isn't enough money in the world to clean up the Gulf of Mexico. Once BP realizes the extent of this, my guess is that they'll panic and go into Chapter 11."

Meanwhile, BP appears to be mystified about the share decline. "The company is not aware of any reason which justifies this share price movement," it said in a statement on its website today.

"BP faces this situation as a strong company. In March, we indicated that the company's cash inflows and outflows were balanced at an oil price of around $60/barrel. This was before the costs of the incident. Under the current trading environment, we are generating significant additional cash flow. In addition, our gearing is currently below the bottom of our targeted range."

The firm added: "Our asset base is strong and valuable, with more than 18bn barrels of proved reserves and 63bn barrels of resources as at the end of 2009. All of the above gives us significant capacity and flexibility in dealing with the cost of responding to the incident, the environmental remediation and the payment of legitimate claims."

In a widely circulated research note, London-based Abuthnot analyst Dougie Youngson wrote last week: "The key question now is whether BP, and not just BP CEO Tony Hayward, can survive."

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