June 25, 2010 / 12:52 AM / 7 years ago

British PM fears BP's "destruction", stock plunges

<p>Gas and oil continue to leak at the Deepwater Horizon oil spill site in the Gulf of Mexico, in this image captured from a BP live video feed late June 24, 2010.BP/Handout</p>

TORONTO/HOUSTON (Reuters) - Fearing the "destruction" of BP Plc (BP.L) (BP.N), British Prime Minister David Cameron said on Friday some certainty is needed over its costs from the Gulf of Mexico oil spill even as the company's stock plunged to a 14-year low.

Total share losses for the embattled British energy giant since the worst oil spill in U.S. history began on April 20 stand at around $100 billion, more than halving its market value prior to the disaster. BP stock on Friday fell more than 6 percent in London and New York.

BP plans to nearly double next week its capacity for siphoning oil gushing from its ruptured deep-sea well, but a looming storm is raising fears the effort could be disrupted for days or weeks. BP and the U.S. government nervously watched as an approaching low-pressure system over the western Caribbean Sea gathered strength.

Cameron is due to meet on Saturday with U.S. President Barack Obama on the sidelines of the G8/G20 summits in Canada. He has pledged to discuss BP with Obama, who has been highly critical of the company. British business and shareholder groups have clamored for Cameron to defend the company.

"I think it is also in all our long-term interests that there is some clarity, some finality, to all of this, so that we don't at the same time see the destruction of a company that is important for all our interests," Cameron told Canadian broadcaster CBC.

BP said it has paid out $2.35 billion so far in clean-up and compensation costs related to the worst oil spill in U.S. history.

That does not include the $20 billion oil spill fund it has agreed to set up, nor the billions of dollars it will have to pay in fines. Under the Clean Water Act, BP could potentially face penalties of at least $15 billion.

"This is a vital company for all of our interests. The view I take is that BP itself wants to cap the well and clean up the spill and compensate those who have had damages," Cameron said.

"It wants to do these things, it will do these things. I want to work with everyone concerned to try to make sure that out of all this there will still be a strong and stable BP, because it is an important company for all of us," he added.

BP was once a predominantly British company but now has global operations and a major presence in the United States. Around 40 percent of its shareholder base is in Britain and a similar proportion is drawn from the United States.

Kenneth Feinberg, the man appointed by Obama to oversee BP's $20 billion compensation fund, said it made "absolutely no sense" to drive the company into bankruptcy. He was speaking at a public event in Larose, Louisiana.

The well ruptured on April 20 when an explosion blew up an offshore rig on the surface above it, killing 11 workers. The spill has soiled the U.S. Gulf coastline and threatened multibillion dollar tourism and fishing industries.

BP STOCK

<p>A worker ties a boom used to mop oil from the Deepwater Horizon spill from a beach in Gulf Shores, Alabama June 24, 2010.Lee Celano</p>

In London, its stock plunged 6.4 percent on Friday, trading at its lowest levels since 1996, on talk it needs extra cash to fund the clean-up and worries about bad weather. On Friday, U.S.-listed shares dropped 6.1 percent, also to a 14-year low, on a rumor that analysts recommended the company sell stock.

"There was talk that a couple of Wall Street analysts had recommended the company do a $10 billion equity offering. Aside from all the other problems facing the company, if they issued shares now, it would represent dilution to current shareholders," said Michael Sheldon, chief market strategist at RDM Financial in Westport, Connecticut.

A spokesman for BP said it had "considerable firepower" to meet the costs of the spill and denied market talk that the company was seeking bankruptcy protection.

In the Gulf, BP said its oil-capture systems collected or burned off 23,725 barrels of oil on Thursday.

U.S. Coast Guard Admiral Thad Allen, who oversees the federal relief effort, said BP was on track to nearly double its oil collection capacity next week. "We will have three vessels and 53,000 barrels a day of capacity by the end of June," he said.

Slideshow (32 Images)

The U.S. government estimates between 35,000 (1.47 million gallons/5.56 million liters) and 60,000 barrels (2.5 million gallons/9.5 million liters) a day are leaking from the well.

WEATHER WORRIES

BP's oil collection effort, which has been dogged by a series of mishaps including an underwater accident this week, faces a new threat -- stormy weather.

Allen said it would be necessary five days ahead of the arrival of any gale force winds to start to take down the current operations involving ships and other equipment collecting some of the oil spewing from the ruptured well.

Because of this, oil could flow unchecked from the ruptured well into the sea for up to 14 days, Allen said.

Weather forecast models are divided on whether the system, now in the western Caribbean, will turn northwest toward Mexico, northeast toward the Florida Panhandle or north toward the central Gulf where BP is struggling to stop the spill.

U.S. oil crude surged 3 percent, hitting a seven-week high, on worries the bad weather could potentially threaten Gulf oil production. The concerns also boosted U.S. natural gas futures by nearly 2 percent.

BP said two relief wells that offer the best hope of plugging its well were on track to intercept their target at a depth of 18,000 feet. The wells are due to be completed in August.

U.S. District Court Judge Martin Feldman, who blocked the Obama administration's six-month moratorium on deepwater drilling, on Tuesday sold his holdings in Exxon Mobil Corp (XOM.N), worth $15,000 or less, just four hours before he issued his ruling, according to information in a financial disclosure form released on Friday.

Additional reporting by Scott DiSavino in New York and Jeremy Pelofsky in Washington; writing by Will Dunham; editing by Todd Eastham

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