Shares in BP crash to 14-year low amid new fears

As much as 5.5bn was wiped off the under-fire oil giant, with shares falling nine per cent at one point to below 300p – levels not seen since August 1996. Despite assurances over measures to improve the capture of oil and progress on relief wells to kill the flow, BP said clean-up costs had risen to $2.35bn (1.6bn). Insuring BP's debt for five years now costs 5.85 per cent – meaning an investor holding 10m in BP debt must pay 585,000 to protect itself against potential default, according to financial research firm Markit. The cost of insuring for one year is higher at 7.25 per cent – a clear signal of market worries over the immediate costs faced by BP which would make any debt funding move far more expensive. Analysts said a $10bn (6.7bn) funding injection from a major investor such as a Middle East wealth fund could shore up market doubts at a time when debt funding is dear and asset sales may take time. The move would be similar to that made by Barclays at the height of the financial crisis in 2008, when the bank raised emergency capital from Abu Dhabi and Qatar to avoid taking taxpayer cash. BP insists it is in a strong position to tackle the spill – generating 30bn (20.1bn) in cash a year, with $10bn in committed or stand-by banking facilities, planned asset sales of $10bn and around $5bn (3.4bn) saved from cutting the dividend. But there are worries over the approaching hurricane season in the Gulf, with reports of a potential storm next week that could hamper the response operation. Admiral Thad Allen, who has been heading the federal government's clean-up operation, has warned he will have to redeploy people and equipment to safer areas five days in advance of gale-force winds but said an enormous amount of planning had gone on to ensure the programme continues. BP has so far captured around 364,500 barrels of oil through its containment system, but it is estimated around 35,000 to 60,000 barrels a day are continuing to pour from the well, which ruptured after the Deepwater Horizon oil rig exploded on April 20, killing 11 workers. According to BP, approximately 37,000 personnel, more than 4,500 vessels and some 100 aircraft are involved in the response effort off shore and in Alabama, Louisiana, Mississippi and Florida. The company is also working on two relief wells that would intercept the leak allowing the busted cap to be "killed". It is expected, however, that these will take three months amid fears in the US that any errors will lead to another blowout. Net revenue BP receives from the sale of oil recovered from the spill is being donated to the American National Fish and Wildlife Foundation which will manage the fund to assist the recovery in the affected states. . Forecasters have said that should a tropical cyclone move to the east of the spill, rotating winds would spin the oil-contaminated water out to sea. But if the storm heads west of the leak, the winds would blow the oil on to the shore. Shares have been punished since the crisis began, wiping more than 60bn from the stock market value of the business. The group was reportedly planning a mammoth fundraising programme to shore up its finances as the clean-up bill soars. As well as the ongoing cost of the operation and claims, it has also set aside a $20bn (13.5 bn) compensation fund for those affected by the spill. Already almost 74,000 claims have so far been filed and more than 39,000 payments have been made, totalling almost $126m. Chief executive Tony Hayward is said to have told staff that operating results due out next month will be "very strong", although he recognised the group's need to sell assets and show balance sheet strength to deal with the liabilities.