AT A GLANCE: Congress: 'Serious Questions' On BP Decisions

14th Jun 2010 21:31

THE NEWS: BP PLC (BP, BP.LN) Chief Executive Tony Hayward will face even tougher questioning Thursday when he appears before Congress after new documents raised "serious questions" about BP's decisions before an explosion on the Deepwater Horizon drilling rig caused the deaths of 11 workers and a massive spill of oil into the Gulf of Mexico. BP, under pressure from U.S. authorities, outlined a plan to capture all the oil its damaged well is spewing into the Gulf of Mexico by the end of June. BP said the cost of its response to the oil spill so far is $1.6 billion but said it was too early to quantify the final bill. The U.S. said it will ask BP to create an independently administered fund for reimbursing Gulf Coast businesses and residents hurt by the massive spill, which has affected four states. BP has hired Goldman Sachs, Blackstone Group and Credit Suisse Group to help it ward off takeover attempts, Fox Business Network's Charles Gasparino reported. A low-pressure area forming over the Atlantic could become the first tropical storm of the season and could push oil-polluted water from the Gulf into new states. BP shares fell more than 9% in both London and New York. THE DETAILS: Congressional investigators say documents uncovered as part of their inquiry into the Gulf of Mexico oil spill have raised "serious questions about the decisions made by BP in the days and hours before the explosion on the Deepwater Horizon" drilling rig. In a letter sent Monday to BP CEO Hayward, the Democratic leaders of the House Energy and Commerce Committee say that, in the days and hours leading up the April 20 explosion, BP appears "to have made multiple decisions for economic reasons that increased the danger of a catastrophic well failure." BP expects to have the capacity to capture between 40,000 barrels and 53,000 barrels of oil a day by the end of this month, up from its current capture rate of about 15,000 barrels a day. Scientists estimate the well is spewing up to 40,000 barrels a day. BP said further enhancements will increase the collection capacity to as high as 80,000 barrels a day by mid-July. The new plan is in response to U.S. Coast Guard demands that the company come up with a more aggressive plan to contain the leak. Meanwhile, BP said its costs so far total $1.6 billion, including the spill response, grants to U.S. Gulf states and claims paid. BP said it has made more than 26,500 payments to claimants totaling more than $62 million. One analyst said the ultimate cost of the spill could be between $3 billion and $6 billion. Some U.S. officials, concerned that BP could avoid paying claims if it files for bankruptcy protection, say that creating an escrow account to cover claims could provide a measure of security. BP insists it has the financial muscle to pay for the cleanup. Democrats in the U.S. Senate asked BP to set aside $20 billion in an account. President Obama, who is visiting the Gulf Monday and Tuesday, plans an address to the nation Tuesday night. He will meet with BP executives on Wednesday. Obama has suggested BP suspend its second-quarter dividend payment to shareholders and pay claims to Gulf Coast residents. BP's board was scheduled to meet Monday, but no decision is expected on whether it will pay its full dividend. BP CEO Hayward has said the board could consider cutting or deferring the dividend. The Deepwater Horizon drilling rig at BP's Gulf of Mexico oil field exploded and later sank in April, killing 11 workers and unleashing one of the worst oil spills in U.S. history. The oil threatens to cause environmental and economic devastation in the region. A low-pressure area forming over the Atlantic could become the first tropical storm of the season, the National Hurricane Center warned Monday. "There remains a high chance, 60%, of this system becoming a tropical cyclone during the next 48 hours," the center said in a statement, as officials anxiously eye weather reports. A major storm could push oil-tainted water from the Gulf of Mexico spill further ashore or into new states, and bring more misery to earthquake-ravaged Haiti where hundreds of thousands still live in precarious conditions. MARKET REACTION: Shares of BP fell Monday in London and the U.S., erasing some gains from late last week, as investors fretted over how additional funding demands from the U.S. to pay for the damages of the oil spill could affect the oil giant financially. In the U.S., BP's American depositary shares lost 9.7% to $30.67, erasing Friday's rally and part of Thursday's, although it is still above the 52-week low hit last Wednesday at $29. In London, BP's shares fell 9.3%. In other markets, the action was similarly bearish. Volume in put options, which convey the right to sell shares, was elevated and higher than the volume in call options, which convey the right to buy shares. Credit-default swaps for BP, which represent the cost to insure its bonds, widened throughout Monday's session and from Friday. Moody's Investors Service said in a Monday report that the oil spill created "an unprecedented financial, legal, regulatory and environmental crisis for the companies that operate" in the Gulf of Mexico. Moody's also cautioned that, while the valuations for companies operating in the Gulf "are expected to rebound eventually, it is difficult to tell when the market will regain its appetite for the risk involved in deepwater production." DOW JONES COVERAGE: =BP WATCH: BP Shares, Options Reflect Concerns Over Liabilities OPTIONS REPORT: Bears Paw BP, But Bulls Charge Anadarko =WSJ: Lawmakers Raise 'Serious Questions' About BP Decisions BP Hires Banks To Ward Off Takeover Attempts -Fox Business's Gasparino Low-Pressure System Could Form First Atlantic Tropical Storm -BP Outlines Latest Strategy To Capture More Oil From Spill -2nd UPDATE: Senate Democrats To BP: Set Aside $20B For Spill -BP: US Oil Spill Response $1.6B To Date; 51,000 Claims Submitted -WSJ: US To Demand BP Fund -BP: No Decision On 2Q Dividend Expected At Mon Board Meeting For more coverage of the oil spill, please search under the code BP. (END) Dow Jones Newswires June 14, 2010 16:31 ET (20:31 GMT)