BP takes biggest hit in 18 years as analyst 'smells death' of firm

Shares plunged by as much as 17 per cent at one stage, before settling around 13 per cent lower – wiping some 12bn off its market value. The shares closed 64.8p down at 430p – 13.1 per cent lower.

They tumbled into the red after BP's latest attempts to block the leaking oil well proved unsuccessful and amid mounting fears over the ultimate financial toll on the company.

One analyst said the relentless oil leak – now the worst in United States history – had the potential to "break BP" if the well was not brought under control soon.

United States President Barack Obama promised yesterday that if laws were broken in the devastating oil spill, those responsible would be brought to justice.

Mr Obama, speakingafter meeting the co-chairs of a new oil spill commission, also said BP would be held accountable for financial losses from what he called the "greatest environmental disaster of its kind in our history."

"What is being threatened, what is being lost isn't just a source of income but a way of life," Mr Obama said with former Senator Bob Graham and former Environmental Protection Agency chief William Reilly at his side in the White House Rose Garden.

Mr Obama said: "If our laws were broken, leading to this death and destruction, my solemn pledge is that we will bring those responsible to justice on behalf of the victims of this catastrophe and the people of the Gulf region."

BP's "top kill" operation to cap the well with mud and other debris proved unsuccessful over the weekend and the company is now working on using robot submarines.

But this technique has never been used before and it is far from certain that the procedure will work, potentially leaving BP with no other option than to drill relief wells which could take until August to complete.

BP admitted yesterday that the total cost of the response had reached $990m (682.3m) so far.

However, the cost to BP could be more long-term, with the risk of tough punitive action from the US government and reputational damage, according to experts.

Dougie Youngson, oil analyst at Arbuthnot, said: "This situation has now gone far beyond concerns of BP's chief executive Tony Hayward being fired, or shareholder dividend payouts being cut – it's got the real smell of death. This could break BP."

He added: "Given the collapse in the share price and the potential for it to fall further, we expect that it could become a takeover target – particularly if its operating position in the US becomes untenable."

BP's dramatic shares slump sparked a wider plunge on the FTSE 100 Index yesterday, although the market pulled back from the worst of its falls.

The group is a major constituent of London's Footsie, accounting for around seven per cent of the entire index, meaning that each 10p change in its share price moves the FTSE 100 by nearly nine points.

Some market analysts believe the shares fall has been an over-reaction, although the group's stock market troubles are unlikely to ease until the well has been brought under control.

Its stock market misery also spells bad news for many of Britain's pension funds, which invest heavily in BP shares.

So far the group has lost around a third of its market value – some 40bn – since being thrown into turmoil after the Deepwater Horizon rig exploded and sank on April 20, killing 11 workers.

BP has tried and failed five times to stop the well flowing. Its next move involves deploying remote-controlled submarines to carry equipment and cut small pipes 5,000ft below the surface of the water before placing a containment cap over the leak.

The attempt, which began on Sunday, should take four days to complete but BP said the plan was complex and success was not assured.