Monday, November 29, 1999

Hayward set for grilling, investors welcome BP deal

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BP Chief Executive Tony Hayward will face the wrath of U.S. lawmakers on Thursday as investors welcomed a plan to set up a $20 billion fund to cope with Gulf of Mexico oil spill claims.Shares in BP, which have nearly halved in value since the April 20 explosion on an offshore rig that led to the spill, rose nearly 10 percent in early trade, with analysts saying that some of the heat had been taken off the company by its move to set up the fund and suspend its dividend.U.S. President Barack Obama announced the agreement on Wednesday after White House officials held four hours of talks with BP executives. The British company's bosses emerged from the discussions to offer an apology to the American people for the worst oil spill in U.S. history."A significant part of the uncertainty is over now," said Societe Generale analyst Evgeny Solovyov."Now they have a political agreement so we now have much more visibility on the potential costs. This is the most important factor, so you can no longer talk about apocalyptic scenarios," he said.The explosion on an offshore rig leased by BP killed 11 workers and ruptured a deep sea well. The ensuing spill has fouled 120 miles (190 km) of U.S. coastline, imperilled multi-billion dollar fishing and tourism industries and killed birds, sea turtles and dolphins.BP CEO Hayward, the public face of the company's response to the disaster, will appear at a congressional hearing later on Thursday to explain the events leading up to the spill and what BP has done to clean up the mess.A number of other oil companies were seen to throw BP to the wolves in congressional hearings this week, portraying themselves as a cut above the London-based firm in terms of safety practices and operational standards.Hayward, in turn, will try to widen the circle of blame on Thursday and is expected to rebuff those claims.The entire industry needs to improve, and it is too early to understand the cause of the "complex accident", Hayward said in prepared testimony, adding that "A number of companies are involved, including BP," in the disaster.Graphics, click also will be under pressure to avoid another gaffe that could further damage BP's dented reputation.He was forced to apologize publicly after telling Gulf residents last month that he would "like my life back," a comment widely viewed as insensitive in face of the region's struggle to contain the impact of the slick and the deaths caused by the explosion.BP Chairman Carl-Henric Svanberg on Wednesday said the company was not greedy and cared "about the small people." He, too, apologized and issued a statement saying he "spoke clumsily."BP announced a $10 billion asset sale programme as part of the deal, and bankers said most divestments would come from outside the United States. Oppenheimer & Co analyst Fadel Gheit pegged the value of the company's assets at more than $250 billion.Oil and gas deal activity is at a record high this year, with more than $128.5 billion of transactions worldwide through June 4.Any move by BP to cancel or suspend dividends is an emotive issue in the UK, where it accounts for 12-13 percent of payouts."We are taking the view that BP will plug the oil well later this year and will be back on the dividend paying list next year," George Luckraft, lead manager of the 200 million pound AXA Framlington Equity Income Fund. "If you sell BP now, you will only have to buy it back next year and probably at a higher price. So we are holding onto the stock at the moment."BP accounts for 4 percent of his fund.UK finance minister George Osborne told a radio channel: "Let's not forget this is a very important company, not just to the British economy but to the American economy as well. And we want it to succeed and flourish in the future for all our sakes."GRILLING LIKELYPublic anger over the handling of the crisis is intense, especially on the U.S. Gulf Coast.Obama has sharpened his criticism of BP, and lawmakers have publicly grilled the company's executives, particularly Hayward. It is expected to be no different on Thursday when the BP chief executive visits Capitol Hill.Obama has watched support fade as his fellow Democrats gear up for tough congressional elections in November. With many voters riveted by the crisis, lawmakers are unlikely to go soft on Hayward.The company said on Wednesday it started a second system to siphon oil from the leaking well, a day after a team of U.S. scientists raised their high-end estimate of the amount of crude oil flowing from the well by 50 percent to between 35,000 and 60,000 barrels (1.47 million gallons/5.56 million liters and 2.52 million gallons/9.52 million liters) per day.The government's probe of the spill, which is shared by the Coast Guard and the Interior Department's Minerals Management Service (MMS), will also come under scrutiny on Thursday when the Interior Department's inspector general, Mary Kendall, testifies before a U.S. House of Representatives hearing.In prepared remarks, Kendall said the Coast Guard's investigative procedures were "comprehensive, but in my view completely backwards," saying it focused on holding hearings rather than developing evidence.Meanwhile, frustration grows for Gulf residents who are scared that the spill will kill the region's share of offshore oil drilling, which is a critical source of well-paid jobs in several relatively poor U.S. states, primarily Louisiana.(Additional reporting by Matt Spetalnick, Caren Bohan, Patricia Zengerle and Alister Bull in Washington, Raji Menon and Sarah Young in London, Kristen Hays in Houston, Braden Reddall in San Francisco and Jeffrey Jones in Buras, Louisiana; Writing by Sitaraman Shankar and Peter Henderson, Editing by Andrew Callus)
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