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British government increasingly concerned that BP could collapse home

BP shares rise on hopes of international rescue

BP is believed to have approached several sovereign wealth funds, including Abu Dhabi, Kuwait, Qatar and Singapore

Richard Wray: Tuesday 6 July 2010 10.50 BST

BP has been talking to international investors about a possible rescue. Photograph: Newscast

Speculation is mounting that BP is looking for a so-called white knight investor as the oil company, whose shares have more than halved since the start of the oil spill in the Gulf of Mexico, faces the prospect of a hostile takeover from a rival oil group.

Talk that BP could bring in new investors pushed its shares up almost 5% in early trading this morning. Libya‘s state-owned oil group has expressed its interest in buying a stake in the bombed-out oil group and there are rumours that management have approached several sovereign wealth funds.

BP’s chief executive, Tony Hayward, meanwhile, has just arrived in Azerbaijan for a one-day visit which should provide investors with some insight into the firm’s plans for its assets in the Caspian Sea. BP has interests in offshore gas and oil fields as well as a stake in an export oil pipeline which goes to Turkey. The company is looking to raise $10bn (£6.58bn) through a series of disposals but its Caspian assets have not yet been among those earmarked for sale.

Discussion of BP’s options among traders has helped offset reports that the British government has become increasingly concerned that the company could collapse. A report in the Times said that the Department for Business and the Treasury are examining the potential impact of a takeover of BP, once Britain’s biggest company, on UK interests domestically and around the world. As well as employing more than 10,000 people in the UK and providing a crucial dividend stream to pension funds, it owns key domestic infrastructure including the Forties Pipeline System that links up oil and gas fields in the North Sea.

Billions of pounds have been wiped from the value of BP’s shares since the Deepwater Horizon disaster, making the company vulnerable to a takeover. The environmental damage has now affected all the US states along the Gulf of Mexico, with “tar balls” reportedly discovered over the weekend along the Texas shore. Samples of the tar are currently being tested to determine if the oil came from the Deepwater Horizon spill. On Monday BP said that the spill has so far cost it $3.12bn (£2bn).

Vulnerable to rivals

The dramatic fall in BP’s share price as a result of the political and environmental storm that has erupted since the Deepwater Horizon rig exploded on 20 April, has left it vulnerable to a takeover. Rivals ExxonMobil, Total and Royal Dutch Shell have all been mooted as potential predators. In an effort to see-off unwanted advances, BP has been talking with major international investors in order to drum up interest in its shares. The company does not, however, want to issue new shares. Instead it would like new investors to pick up their stakes in the market. It has approached several sovereign wealth funds, a senior source in the United Arab Emirates told Reuters, including representatives in Abu Dhabi, Kuwait, Qatar and Singapore. The Kuwait Investment Authority already has a stake of 2.8% in BP while the Norwegian sovereign wealth fund has a 1.3% stake.

On Monday Shokri Ghanem, chairman of Libya’s national oil company, told the Zawya Dow Jones news service that BP is a bargain and the North African nation’s sovereign wealth fund, the Libyan Investment Authority, should invest in it. “BP is interesting now with the price lower by half, and I still have trust in BP,” Ghanem added.

Separately, it has emerged that BP has contacted its partners in the well to demand that they pick up part of the bill for the Gulf clean-up operation. BP has sent out demands for almost $400m to Anadarko and Japan’s Mitsui Oil Exploration Company, both of which are minority shareholders in the well. Anadarko owns 25% of the well and Mitsui has 10%.


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