BP shares tumble amid spill worries

Drop wipes away $23 billion of oil company's market value

updated 12:34 p.m. ET, Tues., June 1, 2010

 

BP faced a grim future on Tuesday as its failure to stop a Gulf of Mexico oil spill prompted a plunge in the energy giant's shares and the possibility of a criminal probe by the Obama administration gained strength.

 

President Barack Obama, under pressure to contain the worst oil spill in U.S. history, struggled to get on top of one of the greatest challenges of his presidency. He met co-chairs of a commission he created to investigate the disaster and vowed after the meeting that if his admonistration discovers that laws were broken, it would bring those responsible to justice.

 

"We have an obligation to investigate what went wrong and to determine what reforms are needed so that we never have the experience of a crisis like this again," Obama said.

 

"If the laws on our books are insufficient to prevent such a spill, the laws must change. If oversight was inadequate to enforce these laws, oversight has to be reformed," he said.

 

"What is being threatened, what is being lost isn't just a source of income but a way of life," Obama said, with former Senator Bob Graham and former Environmental Protection Agency chief William Reilly at his side in the White House Rose Garden.

 

BP fell by as much as 17 percent during London on Tuesday, wiping $23 billion off its market value, and were trading down 13 percent just before the market closed. The shares were hit by weekend news that its latest attempt to plug its blown-out seabed well had not worked, sparking fears oil could leak into the Gulf until August.

 

The shares have lost more than a third of their value, or about 46 billion pounds ($67 billion), since the leak started six weeks ago. The cost of dealing with the crisis now totals $990 million, and is rising.

 

Gloomy analysts
Analysts were increasingly gloomy about the company as an investment, with one issuing a sell order and saying he thinks the company will be broken by the crisis.

 

In its latest attempt to stop the mile-deep gusher, BP is attempting an untested plan to use a dome to funnel oil to a tanker on the surface. Robotic equipment was being used to cut parts of a pipe 35 feet away from the wellhead in preparation for the dome.

 

"We are intent on minimizing the flow of the oil into the Gulf and we've begun a series of operations to ensure just that," BP managing director Bob Dudley told CNN.

 

If this attempt fails, it is possible that up to 19,000 barrels of oil a day (3 million liters) will leak into the Gulf until relief wells, due in August, are completed.

 

White House advisor Carol Browner described the leak will increase in rate as a "deeply, deeply troubling" possibility.

 

The leak is a financial and public relations nightmare for BP and its problems are just beginning.

 

U.S. Attorney General Eric Holder made his first visit to view the damage ahead of what experts have said will be a criminal probe into the explosion and oil spill that could produce record fines.

 

Joined by top department officials, Holder was to meet state and federal prosecutors from Louisiana, Alabama and Mississippi.

 

The Justice Department has been silent so far on an investigation but sent the companies involved letters demanding they preserve their records, often a first step in a criminal probe.

 

Obama, who is fighting accusations that he has not reacted swiftly enough to a disaster that threatens Louisiana's multibillion dollar seafood industry, sat down with the heads of a commission looking into the leak.

 

Commission
The commission will be similar to those that examined the explosion of the space shuttle Challenger in 1986 and the Three Mile Island nuclear accident in 1979.

 

The fate of BP's shares weighed on investors but was of little concern to residents of Louisiana's coast half a world away, who have suffered crippling losses because of the closure of some Gulf waters to fishing.

 

"I really don't care much about it (the share price)," said Kimberly Mertz, who works at a marina in rural Venice, Louisiana. "We want to get everything cleaned up."

 

The slick has spread over 100 miles of Louisiana's coast but Mississippi and Alabama have escaped so far with only scattered tar balls and oil debris reaching its coasts.

 

That could change as National Oceanic and Atmospheric Administration said moderate southerly and southwesterly winds this week may start moving oil closer to the Mississippi and Alabama coasts.

 

The forecast was a reminder that oil from the unchecked spill, broken up and carried by winds and ocean currents, could threaten tourism mecca Florida, as well as Cuba and Mexico.

 

Raising the stakes still further, Tuesday is the official start of the 2010 Atlantic hurricane season, which forecasters predict may be the most intense since 2005.

 

That year Hurricane Katrina ravaged the region and disrupted offshore oil and gas output. Experts fear a big storm could drive more oil ashore and force BP and the U.S. government to suspend cleanup efforts.