REUTERS - Shares in oil giant BP continued to fall heavily on Thursday, hitting their lowest level since 1997, even as the company said it saw no justification for such a move.
The shares opened trading in London 11 percent lower before recovering to trade down 7.3 percent at 363 pence at 0726 GMT, against a 2.3 percent drop in the STOXX Europe 600 Oil and Gas index.
The drop follows days of heavy losses and catches up with a drop of over 15 percent in the price of BP’s U.S.-traded American Depositary Receipts (ADRs) on Wednesday.
Much of the U.S. fall came after the UK market had closed after U.S. Interior Secretary Ken Salazar said BP would be told to pay workers laid off due to a drilling moratorium announced in the wake of the oil spill in the Gulf of Mexico.
The comment revealed a new liability, which could amount to many millions of dollars, and signaled a ratcheting up of political pressure on BP, spooking investors.
However, BP said it had the resources to deal with its liabilities.
“BP faces this situation as a strong company,” the company said in a statement on Thursday.
“The company is not aware of any reason which justifies this share price movement,” it said of the ADR drop.
ING analyst Jason Kenney said the stock was “materially oversold” but added he didn’t see any likelihood of investor sentiment toward BP improving anytime soon.
Analysts at Bank of America Merrill Lynch said the company could afford to pay its $28 billion estimate of spill costs but added there was massive uncertainty around the overall impact with a possible dividend cut, management changes and more limited growth opportunities in future.
Five-year BP credit default swaps rose 140 basis points (bps) to 520 bps, making a rise of 250 bps in two days, one trader said, implying that the cost of insuring BP’s debt against default had almost doubled in recent days.
The cost of the response effort to date has been around $1.43 billion, BP said.