BP continues decline as oil reaches beaches and US mulls oil tax

Shares in BP (LON:BP) have slid drastically since the oil giants announced the oil leak caused by an explosion on an offshore drilling rig on April 20 which is set to become the US’s biggest oil disaster in history. And just as fast as oil has been gushing into the waters of the Gulf of Mexico, the shares have slipped to a 10-month low shedding nearly 26 per cent off the share price of the day the explosion took place.

Kate Neilson
shareprices.com - Tuesday, May 25, 2010

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BP's share price has dropped over 25 per cent since the oil rig explosion on April 20

Oil and gas analysts pinned a ‘buy’ rating on BP shares recently as the price dipped due to the infamous leak in the Gulf of Mexico.However, there are still no signs of the shares stabilising. And if the decline continues there is a real fear that BP will have to price in a dividend cut which could potentially put an end to Tony Hayward’s reign as CEO but also be bad news for the UK pension fund.

BP’s slide has coincidentally come at the same time as euro zone fears have picked up and the FTSE 100 has started to shed points. And many analysts claim BP shares have had their part to play in the 12 per cent decrease for the UK’s top index.

BP shares have hit a 10-month low today, falling as low as 469.75p with a decline of over four per cent totalling a share price tumble of over 25 per cent, stripping £34bn from the group’s market value, since April 20.

And the future doesn’t look too prosperous in the short-term for the British-based group.

The firm pledged last night to pump £346m into a ten-year research programme into the damage caused by the spill. That’s after it had already previously vowed to cover all the costs of the disaster, which spiralled another £93m last week to a total estimate of £526m.

The US Government and President Obama himself have pressured BP to solve the leak problem in recent weeks, and the reaction from the US could put BP under fire from competing oil suppliers. The US Senate is currently mulling upping the maximum amount of cash oil companies would be required to pay for economic losses to $10bn from £75m – a fee that would apply to new and current leases that many small offshore-operating energy companies couldn’t afford – and Congress is also considering quadrupling tax on oil to raise $11bn over the next decade to help fund the clean-up caused by the leak.

The US Government has threatened to push BP to one side and take over the bid to put an end to the leak after a number of attempts by the oil group failed. However, experts have warned against the move with BP having more expertise and knowledge on controlling the problem that anyone the US could employ to take over.

BP will go ahead with its ‘Top Kill’ operation tomorrow – pumping concrete and mud into the broken well – but has admitted the chances of success is seven out of ten.

Tony Hayward spoke yesterday at the oil-soaked Fourchon Beach on the Louisiana coastline saying: "We are going to do everything in our power to prevent any more oil from coming ashore and we will clean every last drop up and we will remediate all of the environmental damage."

 

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