US, states may demand more money from BP to cover oil damages

14 June 2010 17:46  [Source: ICIS news]

BP protesterHOUSTON (ICIS news)--Shares of BP fell by more than 7% on Monday on the New York Stock Exchange, as state and federal governments may demand that the company pay more money to cover damages caused by the oil spill in the Gulf of Mexico.

The White House plans to pressure BP to fund an escrow account that would pay claims filed for damages, according to a report from CNN, which quoted David Axelrod, senior advisor to President Barack Obama.

Earlier, the Wall Street Journal reported that Alabama and Florida may request that BP pay millions to cover income lost to the oil spill.

More risk could come from Obama, who was visiting the Gulf coast this week and giving a nationwide address on Tuesday, said David Pursell, managing director of Tudor, Pickering, Holt and Co, an energy investment bank.

BP's stock fell because of growing uncertainty about the Gulf oil spill, Pursell said.

In particular, if BP were forced to establish an escrow account, the resulting strain on its liquidity could force the company to temporarily suspend its dividend, he said.

However, BP was still far from selling off actual assets, Pursell said.

In fact, the government may avoid pushing BP too far, since that could threaten clean-up funds, Pursell said.

"BP is worth more alive than dead," Pursell said. "If alive, they are spinning off cash."

Oil began spewing from the bottom of the Gulf after a 20 April explosion sank the BP-operated Deepwater Horizon offshore rig. BP said on Monday that the cost of its response to date amounts to approximately $1.6bn (€1.3bn).

US officials estimated that the well was releasing as much as 40,000 bbl/day of oil into the Gulf of Mexico.

BP was successfully siphoning a portion of the oil. However, the only method to completely shut the leak remains the drilling of two relief wells. That process is ongoing and is not expected to be complete until August.

Shares of BP traded at $31.32 as of 12:30 hours New York time (16:30 GMT) on the New York Stock Exchange, down 7.8%.

BP shares trade on US stock markets through American depositary receipts (ADR), which allow foreign stock to trade on the nation's market.

($1 = €0.83)

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