December 16, 2010 / 10:04 AM / 9 years ago

BP investors spooked by oil spill lawsuit

A logo is seen at a BP fuel station in London July 27, 2010. REUTERS/Toby Melville

LONDON (Reuters) - Oil major BP was the biggest faller on Britain’s blue-chip board on Thursday, as investors fretted that a U.S. government lawsuit might mean the cost of its oil spill will be far higher than predicted.

Legal experts have said BP’s $40 billion estimate for the total cost of the oil spill — hitherto largely accepted by financial analysts — could double if the U.S. government managed to convince a court that BP had been grossly negligent.

BP and analysts had dismissed this possibility so far, but the harshly worded lawsuit filed on Wednesday by the Obama Administration spooked investors who in recent months have been betting on a BP recovery and a return to paying dividends.

“Clearly it is a negative development. It creates some fears concerning the ultimate decision on gross negligence or not,” said Societe Generale analyst Irene Himona.

“There is ongoing legal uncertainty,” Himona added.

BP’s London listed shares closed down 1.4 percent at 470 pence, underperforming a 0.1 percent rise in the STOXX Europe 600 Oil and Gas index. BP’s New York-listed ADRs added to losses on Wednesday, trading down 0.2 percent at 1836 GMT.

In recent months, BP’s shares had risen over 60 percent since hitting a low below 300 pence, on hopes the worst was behind the company.

The stock was up 10 percent in December alone as analysts and investors speculated that BP’s oil spill provision could significantly overstate its liabilities, a hope that was dented by the lawsuit.

“This is a reminder of what people should have already have known, and I suppose it makes people a little nervous,” said one top 10 investor.

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