Fears oil may continue spewing into the Gulf of Mexico for another two months into the hurricane season wiped $23 billion off BP’s market value on Tuesday and sent the cost of protecting its debt soaring.
Costs for the spill have reached $990 million, BP said.
Once Britain’s biggest company and one of the largest oil firms in the world, BP’s debt is AA rated — close to the highest rating given to non-sovereign bonds. However, traders of debt derivatives pushed the perceived risk of default out to a level similar to that of a much smaller oil company, such as Spain’s Repsol, or one of Europe’s weakened banks.
Analysts said rising takeover speculation, although they said reputational damage and the unknown financial cost of the spill would deter suitors for the moment. BP could now be easy prey having lost over a third of its market value or £46 billion ($67 billion) in six weeks.
“Given the collapse in the share price and the potential for it to fall further we expect that it (BP) could become a takeover target — particularly if its operating position in the US becomes untenable,” said Dougie Youngson, analyst at Arbuthnot Securities.
Shares in BP fell close to 17 per cent on Tuesday, hitting their lowest point in over a year as the London market opened for the first time since the failure of its latest attempt to stem the biggest oil spill in US history.
The drop meant the British oil group was worth about £77 billion versus £93 billion on Friday and £123 billion prior to a rig explosion in April that killed 11 workers and unleashed oil from a well head 1.6 km down.