BP shares dropped as much as 9% in London on
Friday, as an analyst suggested the company needs to sell stock to
assure
counter-parties that it has the financial health to withstand the
growing cost
of cleaning up the Gulf of Mexico oil spill.
As the Macondo well continues to leak oil, Nomura analyst Alastair Syme
said
the company's funding could be threatened.
Syme said in a note to clients that the roughly $15 billion of current
liquidity looks adequate to deal with committed acquisitions, spill
cleanup
costs and the phased funding of the $20 billion escrow account.
"But a sharp rise in liabilities or alternatively a collapse in oil
prices
could leave the funding much tighter," Syme said. "Consider too that
BP has an estimated $2 billion to $2.5 billion of one-year commercial
paper to
roll over, needed to fund day-to-day trading activities and working
capital,
which will likely be much harder (and more expensive) to do in this
environment."
Issuing debt is expensive, and selling off assets takes time--so the
analyst
suggests the company sells roughly $10 billion of equity, backed
possibly by
sovereign wealth funds.
In late morning London
trade, BP (BP) shares slumped 7%, sending the stock to a 14-year low.
Credit-default
swaps on the oil giant widened sharply as well, reflecting bond market
worries.
The company Friday said costs of cleaning up the spill had grown to
$2.35
billion.
Besides the worries about funding and cleanup costs, jitters over the
onset of
hurricane season also were weighing as hurricanes and tropical storms
could
make it more difficult for BP to cap the spill.