As BP sinks, Britons worry
With stock sliding, they fear for the firm and their nest eggs. They want less Obama anger, not more.
LONDON - The Gulf of Mexico oil spill risked turning into a transatlantic diplomatic rift Thursday after U.S. threats to have BP fork out billions more for the disaster caused a precipitous slide in the blue chip's stock, hurting retirement savings for millions of Britons.
British lawmakers are even pushing Prime Minister David Cameron to get President Obama to tone down his stinging criticism of the oil company, complaining that hostile rhetoric will have severe implications for pensioners with nest eggs in the company.
The share slide has since April almost halved BP's market value to 69 billion pounds ($101 billion), costing it the spot as Britain's biggest company - and some worry it could become a takeover target for upstart firms in Asia. BP said there was no reason for the stock drop, stressing its strong finances.
The U.S. State Department said that American anger over BP's handling of the disaster would not affect the relationship between the United States and Britain. But rising outrage and fear threatened to continue, and Cameron was expected to raise the issue with Obama over the weekend.
In Washington, White House spokesman Robert Gibbs defended the U.S. rhetoric directed at BP. "We are there to ensure that BP is doing everything that it has to do as the responsible party in this disaster," he said.
British lawmakers want Cameron to stress the company's critical role in the national economy - about 18 million Britons hold shares in the company in one form or another, many through their pension funds.
"I would like to see a bit of cool heads rather than endlessly buck-passing and name-calling," London Mayor Boris Johnson said. "When you consider the huge exposure of British pension funds to BP, it starts to become a matter of national concern if a great British company is being continually beaten up on the airwaves."
Cameron and Foreign Secretary William Hague, who are out of the country on business trips, took a conciliatory stance. In Afghanistan, Cameron said he understood "the U.S. government's frustration, because it is a catastrophe for the environment."
In Germany, Hague said he had not detected any anti-British rhetoric: "The important thing here is dealing with the problem. . . . That's more important than any rhetoric that any of us may have indulged in."
BP shares fell in London after the White House suggested that BP should pay unemployment benefits to thousands of oil workers laid off during a moratorium on deep-sea drilling triggered by the spill.
The U.S. Justice Department added that it was planning to take action when asked at a congressional hearing if an injunction was being considered against BP's plans to pay investors a dividend, worth $10 billion annually, this year.
BP shareholders receive a dividend payment every quarter. It has held steady at 14 cents per share, worth a total of about $10 billion, since July 2008. BP is due to announce details of its second-quarter payment with its earnings report July 27, but it can make changes before then.
There are also worries that Obama, who earlier this week suggested he would fire BP chief executive Tony Hayward if he could, will tap into U.S. anger as oil-coated pelicans and turtles continue to wash up on devastated beaches. The worry is that he will impose longer-term sanctions that will prevent BP from bidding for new contracts in the United States, where it is the biggest oil operator.
But markets were also beginning to heed warnings from analysts who said Wednesday's 15.8 percent sell-off of BP shares in New York was an overreaction - the company has lost about half its market value since the spill began with the April 20 Deepwater Horizon blast.
In London, the stock recovered some ground after dropping as much as 11 percent at the open to a 13-year low. It closed down 6.7 percent at 365.5 pence ($5.35).
In New York, the stock closed 12.3 percent higher, clawing back some of the losses from a 15.8 percent rout Wednesday.
BP said Thursday that it was capturing more oil in a containment system as it also reported that costs so far had risen to almost $1.5 billion - a hefty amount but still manageable given the company turned a $16 billion profit last year.
Hayward has consistently declined to speculate on the final bill, but in an attempt to calm investors Thursday, the company pointed to its supportive additional cash flow from other projects, its strong debt-to-equity ratio, and its proven reserves. It had more than 18 million barrels of proven reserves and 63 billion barrels of resources at the end of 2009.
"We don't believe BP has a funding issue," said Evolution Securities analyst Richard Griffith, "but given the overwhelmingly hostile nature of the U.S. government, the company may decide to suspend payments until the wells are capped and the cleanup sufficiently advanced to convince the U.S. that it can afford all the costs as well as pay dividends.
"Unilateral action against BP over its U.S. operations, be it unreasonable or illegal, hangs over BP."
"There is a lot of very irrational and short-term selling going on," said Robert Talbut, the chief investment officer at Royal London Asset Management, a shareholder in BP. But he added that talk of a potential sale of assets or takeover bid - PetroChina Ltd. has been suggested by some as a potential suitor - was not surprising.
"I can understand exactly why someone else would want to buy the BP assets," he said, "because I think they are grossly undervalued at the moment. As a shareholder, it's not something I would welcome."