BP’s share price tumbled by 15.8 per cent to a 14-year low in New York trading last night amid mounting concerns about the financial impact of the Gulf of Mexico oil spill. Analysts now believe that it is likely that BP will cut or even suspend its dividend after intense political pressure in the US. After US markets closed the Justice Department said it was ‘planning to take action’ to ensure that BP has enough money to cover all spill damages.

The shares were down by 4.2 per cent to 391.5p in the UK but the fall accelerated after the close of trading in London with some US observers casting doubt over the company’s future. The US share price, which closed down $5.46 at $29.20 has now more than halved since the explosion seven weeks ago on an offshore oil rig that threatens an environmental disaster.

The clean-up operation has so far cost the company approx. $1.25 billion (£860 million). The cost of insuring BP bonds against default rose by 40 per cent yesterday, according to Markit, a data provider.

BP has come under increasing political fire including from President Obama who this week suggested that the chief executive Tony Hayward should be sacked for his handling of the crisis.

The former European Commission president Romano Prodi is understood to be assisting BP in its attempt to restore its battered reputation in the United States. The Times understands that Mr Prodi, who twice served as Italy’s prime minister, is a key member of an ‘international advisory board’ assisting BP that also includes Josh Bolten, the former chief of staff to President George W. Bush. Both Mr Prodi and Mr Bolten are former employees of Goldman Sachs, the investment bank that advises BP. BP’s former chairman Peter Sutherland also held a senior role at Goldman.

The group has been helping the oil giant to defend its interests against a fierce onslaught from the US Government, which intensified yesterday as it emerged that 44 US Senators have signed a letter demanding that BP does not pay a dividend next month. Adding to the pressure on BP, the company was also given a 72-hour deadline to produce a new plan for controlling the oil leak from its ruptured Macondo well and was asked to pay the wages of rig workers from other companies affected by a ban on deepwater drilling.

Mr Hayward is preparing for an appearance before the US House Energy and Commerce Committee on the causes of the Deepwater Horizon spill next Thursday. BP confirmed that he was receiving outside training for the congressional hearing.

One day after President Obama suggested that Mr Hayward should be fired for his handling of the crisis, BP shareholders said they feared that either he or Carl-Henric Svanberg, BP’s heavily criticised chairman, would be forced to quit within the next four weeks. While emphasising that there was no concerted push from investors to oust either man, one top-ten BP shareholder said: ‘It’s like the drunk driver being convicted on his third offence. There is a sense of the inevitable about this.’

BP’s political campaign in Washington DC is being spearheaded by Lamar Mackay, president of BP America. A former executive of Amoco, a US oil company bought by BP in 1998, the American is well-connected in Washington DC and was described by one insider this week as a ‘good operator’.
He has been supported by BP’s in-house lobbying operation, BP also employs a string of outside lobbying firms including the Podesta Group, co-founded by John Podesta, the brother of Bill Clinton’s former chief of staff.

(Times Online)