BP shares recover from weak open in London ahead of chairman’s meeting with President Obama

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BP shares fluctuate ahead of White House meeting

LONDON — Shares in BP PLC fluctuated in London trading Wednesday ahead of what promises to be a tense meeting between the oil company’s executives and President Barack Obama over how to handle the costs of the Gulf of Mexico oil spill.

British Prime Minister David Cameron said BP will need certainty about how much it will have to pay to meet “reasonable claims” for damage caused by its leaking well after Obama vowed in a speech from the White House on Tuesday night to make the company shoulder the consequences.

Analysts said investors were now waiting for what emerges from the meeting — BP shares on Wednesday traded in a tight range around Tuesday’s closing price of 342 pence ($5.03) in London.

Cameron, interviewed in BBC radio, said that in his weekend telephone conversation with Obama he had stressed the need for clarity.

“As I discussed with the president, that while it is important that they pay reasonable claims — BP accept this themselves — they do need a level of certainty,” Cameron said.

Cameron said the company needs assurance “that there won’t be claims entertained that are three, four times removed from the oil spill.”

If the expected agreement on an escrow fund is larger than $20 billion, or if there is no limit on BP’s liability, the shares are apt to tumble again, said Manoj Ladwa, senior trader at ETX Capital.

The market also expects to get an answer about whether BP will cut or suspend dividends in response to U.S. pressure, Ladwa said.

Obama has invited BP Chairman Carl-Henric Svanberg, who has kept a very low profile since the leak erupted eight weeks ago, to the White House meeting.

“I will meet with the chairman of BP and inform him that he is to set aside whatever resources are required to compensate the workers and business owners who have been harmed as a result of his company’s recklessness,” Obama said in his address.

BP said that Group Chief Executive Tony Hayward, BP America President Lamar McKay and Managing Director Robert Dudley would accompany Svanberg.

The company had said Tuesday that it shares Obama’s goal of “shutting off the well as quickly as possible, cleaning up the oil and mitigating the impact on the people and environment of the Gulf Coast. We look forward to meeting with President Obama tomorrow for a constructive discussion about how to best achieve these mutual goals.”

Obama has come under pressure for his response to the crisis.

An Associated Press-GfK poll released Tuesday found 52 percent of those surveyed don’t approve of Obama’s handling of the spill, but 83 percent disapprove of BP’s performance.

Reaction on the street in London Wednesday sided with Obama.

“The president is right to be angry,” said plasterer Danny Moncrieffe, 28. “I think he should take control of it himself really. Whatever it costs, BP should cover.”

“If it happened here, I would hope we’d do the same thing — hold the company responsible,” said Guy Smith, 32, a market researcher.

BP said Tuesday it had approved initial payments on 90 percent of commercial large loss claims filed so far. The 337 checks totaled $16 million for businesses that had filed claims of more than $5,000, BP said.

The company added that it has issued approximately 25,000 checks totaling $63 million to cover small and large claims, and expects the total to rise to $85 million by the end of the week.

BP, which earned a profit of $6.1 billion in the first three months of this year, says it has spent in excess of $1.4 billion so far in attempts to stop the flow of oil billowing up from the seabed.

On June 3, the company announced it had set up a $360 million escrow account to pay for the construction of six sections of Louisiana barrier islands approved by the U.S. government.

Gordon Gray and James Evans, analysts at Collins Stewart in London, on Wednesday downgraded their target price for BP shares from 575 pence to 450 pence. They added that they believe BP will bow to U.S. pressure to suspend dividends.

“We think the balance of probability points to BP’s shares offering good value at current levels. However, we think the risks of investing remain high and view BP as an investment for the risk-tolerant and the long-term at present,” they said in a research note.

The analysts say they believe the pressure on the shares is due to a sell-off by U.S. institutions “unwilling to be seen to be maintaining big positions in the stock, particularly ahead of end-June quarter reporting to investors.”