BP Won’t Issue New Equity to Cover Spill Costs


LONDON—BP PLC won’t issue new equity to raise money to cover the costs of the oil spill in the Gulf of Mexico, a company spokeswoman said Tuesday.BP would welcome it if any existing shareholders or new investors want to expand their holding in the company, she said. BP’s shares have lost almost half their value since the Deepwater Horizon explosion that triggered the oil spill April 20.

BP Chief Executive Tony Hayward is visiting oil-rich Azerbaijan amid speculation the company may sell assets to help pay for the clean-up of the Gulf of Mexico oil spill. The one-day visit comes a week after Mr. Hayward, who has been criticized for his handling of the devastating oil spill, traveled to Moscow to reassure Russia that the British energy company is committed to investments there.

BP’s three major projects in the Azerbaijan comprise an offshore oil field in the Caspian Sea; a 30% share in an export oil pipeline which goes to Turkey; and 25% in Shah Deniz, a massive Caspian Sea gas field. Russia’s Gazprom voiced an interest last month in BP’s Shah Deniz share, but the British company has so far ruled out any sale.

A number of press reports during the weekend suggested BP was courting sovereign wealth funds in the Middle East, which could buy new shares to raise an extra £6 billion ($9.08 billion) in capital.

BP’s shares have lost almost half their value since the Deepwater Horizon explosion that triggered the oil spill April 20. Libya’s top oil official, Shokri Ghanem, said Monday that BP is a bargain and recommended the nation’s sovereign wealth fund invest in the oil giant.

BP potentially faces tens of billions of dollars of liabilities relating to the continuing oil spill from its Macondo well in the Gulf of Mexico, which has fouled beaches and marshes and damaged fishing and tourism industries.

The company has already spent $3.12 billion on the cleanup, containment and compensation and has promised to pay another $20 billion into an independently-administered fund to cover future liabilities over the next 3 1/2 years.

However, BP has also built up a substantial war chest to handle the spill costs. It had a prior $5.25 billion credit line available with a number of banks and, in a show of support since the oil spill, eight or nine banks have offered additional standby credit lines totaling $9 billion, according to a person familiar with the matter.

BP also had $5 billion in cash on its balance sheet in early June, will save $7.8 billion through the cancellation of three quarterly dividends and will trim $2 billion from its capital expenditure this year.

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Stuart H. Smith is an attorney based in New Orleans fighting major oil companies and other polluters.
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