‘Criminal charges’ over Deepwater Horizon explosion cause BP shares to plunge
Shares in BP fell after reports its managers may face manslaughter charges over the explosion of the Deepwater Horizon oil rig last April spooked the market.
It added to the woes at the oil giant, which has already seen its ambitious £10bn share swap with Russia’s Rosneft run into difficulty.
BP shares dipped 10.55p to 466.55p on the news, with brokers Collins Stewart downgrading the company to a ‘sell’ from a ‘hold’ and lowering its target price to 475p from 500p.
Worse may be yet to come. having tried and failed to tie the knot with Rosneft in an Arctic exploration and share-swap deal, BP is now under mounting pressure to explain the logic of pressing ahead with the share exchange on its own.
A spokesman described its budding relationship with Rosneft as ‘hugely valuable’, and said it was ‘determined to go ahead with the share-swap’.
But the resolve to stagger on with the deal has baffled some investors.
The Association of British Insurers is understood to have concerns that BP’s decision to issue £5bn of new shares to Rosneft will dilute the value of existing investors’ holdings.
David Cumming, head of UK equities at Standard Life, has also questioned the deal. One analyst noted that without the considerable carrot of the uncharted Arctic blocks, the share swap deal had ‘none of the positives and all of the negatives’.
Gordon Gray, oil and gas analyst at Collins Stewart, added: ‘Uncertainty over the Rosneft deal and consequently over the TNK-BP partnership is likely to overhang investors’ views of BP for some time to come.’
The two-pronged plan with Kremlin-controlled Rosneft made good sense when it was signed in January. Claiming to have the backing of the capricious Russian state, BP was set to drill alongside Rosneft in three oil-bearing locations in the Arctic Ocean.
The second part of the plan was equally strategic but less exciting: a share swap that would see Rosneft acquire 5pc of BP, with BP taking 9.5pc of Rosneft.
That deal was scuppered by BP’s other Russian partner, TNK-BP, a troubled and often fractious venture owned equally by the British oil giant and AAR, a consortium comprising several Russian oligarchs. The consortium, fearing that they were being outflanked by both their partner and a domestic rival, complained that the Rosneft deal breached existing agreements between BP and AAr.
They took their argument to an international tribunal and, on March 24, they won their case.
But BP isn’t going to give up yet. Chief executive Bob Dudley is determined to make the deal work.
Next Monday he plans to appeal to the London-based tribunal, seeking to reinstate the second part of the plan – the share-swap – but not the first.