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FEARS FOR BP AFTER OIL LEAK AND DROP IN COMPANY SHARES

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Wednesday June 2,2010

BP is facing growing speculation it will be vulnerable to a takeover bid as uncertainties and costs mount in the wake of the oil giant’s latest failure to halt the devastating oil spill in the Gulf of Mexico.

The company’s shares plummeted by 64¾p to 430p, wiping £12billion off its market value, prompting analysts to warn the dividend was under threat and the group could fall prey to a rival, such as Exxon Mobil, Conoco, Chevron or even Royal Dutch Shell.

BP said yesterday the spill cost had risen to $990million (£680million) but is likely to grow significantly as the company continues to combat the leak and faces the prospect of litigation and punitive fines in the United States.

Analysts have estimated the eventual cost and liabilities could surmount $15 billion.

Arbuthnot Securities analyst Dr Dougie Youngson said: “If we are being honest, no one really knows how big these could be.”

He said the key question was now “can BP survive?” rather than if the dividend will be cut or chief executive Tony Hayward will go as the company faces a “major financial impact” from the spill.

Youngson was increasingly worried about the “emotive language coming from the US administration and the reputational damage”.

He warned the situation has a “real possibility of breaking the company” and it was “difficult to see how BP can recover”.

The likeliest bidders will be American, with the US unlikely to sanction the sale of strategically important assets to the Chinese or to Shell, with British oil companies in bad ordure in the States.

However, one analyst said no one would buy a group with open-ended liabilities through lawsuits, while another argued the group was financially strong enough.

He said: “The dividend is under threat but the liabilities will be paid over many years.”

DAILY EXPRESS ARTICLE

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