BP: Won't Issue New Equity to Cover Gulf Spill Costs

LONDON (Dow Jones Newswires), July 6, 2010

BP killed speculation Tuesday that it was looking for a white knight investor to take a large equity stake in the company by saying it won't issue new equity to raise money to cover the costs of the oil spill in the Gulf of Mexico.

BP would welcome it if any existing shareholders or new investors want to expand their holding in the company by buying already-listed shares, but no new shares will be listed, said a company spokeswoman.

A number of press reports during the weekend said BP was courting sovereign wealth funds in the Middle East, which could buy new shares to raise an extra GBP6 billion in capital.

BP's shares have lost almost half their value since the Deepwater Horizon explosion that triggered the oil spill April 20. Libya's top oil official, Shokri Ghanem, said Monday that BP is a bargain and recommended the nation's sovereign wealth fund invest in the oil giant.

BP potentially faces tens of billions of dollars of liabilities relating to the continuing oil spill from its Macondo well in the Gulf of Mexico, which has fouled beaches and marshes and damaged fishing and tourism industries.

The company has already spent $3.12 billion on the cleanup, containment and compensation and has promised to pay another $20 billion into an independently-administered fund to cover future liabilities over the next 3 1/2 years.

However, BP has also built up a substantial war chest to handle the spill costs. It had a prior $5.25 billion credit line available with a number of banks and, in a show of support since the oil spill, eight or nine banks have offered additional standby credit lines totaling $9 billion, according to a person familiar with the matter.

BP also had $5 billion in cash on its balance sheet in early June, will save $7.8 billion through the cancellation of three quarterly dividends and will trim $2 billion from its capital expenditure this year.

BP's plan to sell $10 billion of assets to boost its balance sheet could pay off quickly. Sky News reported last week that China National Offshore Oil Company (CEO) could buy BP's stake in Pan American Energy for around $9 billion within weeks.

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