BP Drops 6%; UK Indexes Weak

Arthi Gupta, Mayank Mehta and Sanjay Barot
25 Jun, 2010
New York City

The UK indexes slump after BP Plc stocks plunged to a 14-year low. BP Plc provided an update on developments in response to the oil well incident in the Gulf of Mexico. Leaders of G20 nations are scheduled to meet this weekend to discuss the future course of action to sustain economic recovery.

[R]4:30 PM London – The UK indexes slump after BP Plc stocks plunged to a 14-year low. BP Plc provided an update on developments in response to the oil well incident in the Gulf of Mexico. Leaders of G20 nations are scheduled to meet this weekend to discuss the future course of action to sustain economic recovery.[/R]

In London FTSE 100 Index traded lower 51.86 or 1.02% to 5,048.37 and the pound edged lower to close at $1.492 and edged higher to close at €1.214. BP Plc plunged 6%.

The Bank of England warned that the UK banks face a number of serious challenges ahead and that banks must build up higher reserves to be more resilient to shocks and meet more demanding future regulatory requirements.

Banks also face a ""substantial"" refinancing challenge over the next couple of years, the central bank said in its bi-annual financial stability report. ""[The banks] will need over time to build larger buffers of capital and liquidity to meet more demanding future regulatory requirements,"" the report noted.

The new coalition government in the UK has already announced a levy on bank profits in its emergency budget.

BP Plc said today it has spent $2.35 billion to date to clean up, contain and payout claims and grants to the states on the Gulf of Mexico that have been impacted by the largest oil spill in the Gulf of Mexico.

Two systems continue to collect oil and gas flowing from the Deepwater Horizon''s failed blow-out preventer and transport them to vessels on the surface.

The lower marine riser package containment cap, installed on June 3, takes oil and gas to the Discoverer Enterprise where oil is collected and gas flared. The second system, which began operations on June 16, takes oil and gas to the Q4000 vessel on the surface where both oil and gas are flared.

Oil and gas collection through the LMRP cap containment system was suspended for approximately 10 hours on June 23 following an unexpected release of seawater from the Discoverer Enterprise.

Work continues to collect and disperse oil that has reached the surface of the sea, to protect the shoreline of the Gulf of Mexico, and to collect and clean up any oil that has reached shore.

Approximately 37,000 personnel, more than 4,500 vessels and some 100 aircraft are now engaged in the response effort.

Operations to skim oil from the surface of the water now have recovered, in total, approximately 610,000 barrels of oily liquid. In addition, a total of 275 controlled burns have been carried out to date, removing an estimated 239,000 barrels of oil from the sea''s surface.

To date, almost 74,000 claims have been filed and more than 39,000 payments have been made, totaling almost $126 million.

The cost of the response to date amounts to approximately $2.35 billion, including the cost of the spill response, containment, relief well drilling, grants to the Gulf states, claims paid, and federal costs.

On June 16, BP announced an agreed package of measures, including the creation of a $20 billion fund to satisfy certain obligations arising from the oil and gas spill.

World’s top 20 developed and emerging nations are due to meet in Toronto over the weekend to deliberate on the course of the global economic recovery.

The major themes that the group of 20 nations has identified include sustained and balanced growth, financial sector reform, free trade, reducing global imbalances and the reform of international financial institutions. It is believed that the group will discuss a bank tax as part of its efforts to reform the financial sector.

Gainers & Losers

AstraZeneca PLC, the biopharmaceutical company fell 0.4% to 2,982.50 pence.

Assetco Plc surged 16.8% to 59.00 pence after the fire and rescue services company said fiscal year 2010 revenues rose 33% to £45.2 million from £34.0 million a year ago. Net profit for the year rose 35% to £2.3 million or 2.7 pence per diluted share compared to net profit of £1.7 million or 2.3 pence per share a year ago.

Avis Europe plc plunged 18.5% to 28.50 pence after the car hire firm announces today a 9 for 8 Rights Issue to raise approximately £151 million net of expenses.

BP Plc plunged 6.0% to 304.55 pence.

British Airways Plc, the international scheduled airline fell 0.3% to 207.20 pence.

Cineworld Group plc, the operator of cinema chain rose 2.8% to 197.50 and Devro plc, the manufacturer of collagen products rose 1.1% to 192.00 pence.

Kea Petroleum Plc, the oil explorer plunged 18.9% to 15.00 pence and Keller Group plc, the international ground engineering specialist rose 1.7% to 559.00 pence.

The Berkeley Group Holdings plc rose 1.4% to 811.50 pence. The residential and commercial property company said fiscal year 2010 revenues fell 12.4% to £615.3 million from £702.2 million a year ago. Net profit for the year fell 7% to £79.7 million or 58.7 pence per diluted share compared to net profit of £86.1 million or 65.6 pence per share a year ago.