AT A GLANCE: Oil Executives Testify In DC; Fitch Downgrades BP

15th Jun 2010 17:00

THE NEWS: Executives from BP PLC (BP, BP.LN) and other major oil companies are testifying before Congress on Tuesday as oil continues to gush into the Gulf of Mexico from BP's damaged well. Executives from Exxon Mobil Corp. (XOM), ConocoPhillips (COP), Royal Dutch Shell PLC (RDSA) and Chevron Corp. (CVX) are expected to try to distance their companies from BP. Fitch cut BP's credit rating by six notches to BBB, just two steps above junk, citing increased estimates of the size of the spill and demands from U.S. authorities that the company put $20 billion into a fund for cleanup and compensation costs. THE DETAILS: Rep. Edward Markey (D., Mass.) accused all of the oil companies at the hearing of having spill response plans that are outdated and "dead ringers for BP's." The hearing follows accusations Monday from the House Energy and Commerce Committee that BP took shortcuts to save money, against the advice of key contractors, which may have contributed to the April 20 explosion that killed 11 workers and unleashed the worst offshore oil spill in U.S. history. BP America chief Lamar McKay didn't address those accusations in testimony prepared in advance of the hearing. Exxon Chief Executive Officer Rex Tillerson called the explosion "a dramatic departure from the industry norm in deepwater drilling," according to prepared remarks. Chevron CEO John S. Watson said in prepared remarks that he believes an independent investigation "will show that this tragedy was preventable" and urged lawmakers not to use "this single incident" as the basis for scaling back or shutting down offshore drilling. The Obama administration has put a six-month halt on new deepwater drilling. On Monday, BP outlined new plans it hopes will allow it contain the leak by the end of June. The company said the cost of its response so far is $1.6 billion, but said it is too early to quantify the final bill. Senate Democrats demanded that BP put $20 billion into an escrow account to cover future cleanup costs and compensation payments. The White House has also called for an escrow account free from the control of BP to be established, but has yet to name a specific amount. BP is also facing criticism over plans to pay a dividend to shareholders. Lawmakers say the company should shelve any dividend until funds are reserved to pay for the cleanup and two Democratic senators expressed outrage over reports that BP is considering setting up an escrow account to pay a dividend in the future, which they called a "backdoor payment." Fitch downgraded BP's long-term issuer default rating to BBB from AA, citing the potential cleanup costs and demands for upfront payment to a special fund. The cost to insure BP's debt spiked in response. The oil spill threatens to cause environmental and economic damage in the costal areas of in Louisiana, Alabama, Mississippi and Florida. MARKET REACTION: BP's ADRs were down 1.6% in recent trading to $30.19. BP has lost nearly half of its market value since the spill began. Shares in London were down 3.4% to 342 pence. WHAT'S NEXT: President Obama will address the nation Tuesday night. BP Chairman Carl-Henric Svanberg and other company executives will meet Obama at the White House on Wednesday. BP Chief Executive Tony Hayward is scheduled to appear Thursday before the House Energy and Commerce subcommittee on oversight and investigations. This testimony will be Hayward's first appearance before lawmakers since the April 20 explosion, and is likely to be a highly charged affair. DOW JONES COVERAGE: -Democratic Senators: BP Escrow Dividend Plan 'Unacceptable' -Exxon To Distance Itself From BP As House Hearing Begins -WSJ: Oil Executives Face Congressional Anger Over Spill -BP Slide After Fitch's Six-Notch Rating Downgrade For more coverage of the oil spill, please search under the code BP. (END) Dow Jones Newswires June 15, 2010 12:00 ET (16:00 GMT)