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Published: Friday, 6/18/2010

Oil spill puts investors in world of hurt

BLADE NEWS SERVICES
Oil cleanup workers gather for duty in Orange Beach, Ala., as efforts continue to control the gusher in the Gulf of Mexico. BP is establishing a $20 billion fund to pay claims arising from the spill. Oil cleanup workers gather for duty in Orange Beach, Ala., as efforts continue to control the gusher in the Gulf of Mexico. BP is establishing a $20 billion fund to pay claims arising from the spill.
MIKE KITTRELL / AP Enlarge

LONDON - Just how big is this oil spill, really? For BP shareholders, about $88 billion big - and growing.

That is roughly how much money investors have lost on paper as the oil giant's share price has plunged.

After weeks of gut-churning market losses, shareholders were dealt another blow Wednesday when BP Plc announced it would suspend paying dividends for the rest of the year and establish a $20 billion fund to pay claims arising from the worst spill in American history.

Britain's Daily Mail Thursday accused President Obama of bullying BP into coughing up the $20 billion and said flatly it would come out of the pockets of the nation's retirees: "British pensioners will pick up the bill."

BP dividends account for about one-sixth of British pension funds' income.

Around 40 percent of BP's shareholders are based in Britain, according to British Prime Minister David Cameron.

BP is so big, and its stock is so widely held, that its troubles are being felt throughout the investment world. Large insurance companies in Britain, big money management companies in the United States, and government-controlled investment funds in Norway, Kuwait, China, and Singapore rank among the company's largest stockholders.

BP announced Wednesday it would cancel dividend payments for the rest of the year. Pension funds, which hold major stakes in BP, were unhappy at the suspension of dividends.

Shares in BP rose slightly in London Thursday, as the company's agreement to set up the compensation fund and cancel dividend payments was seen as reducing uncertainty over its liabilities.

BP's shares have lost nearly half of their value - paring the company's market value to $90 billion - since the April 20 explosion on the Deepwater Horizon rig, which killed 11 workers and sent oil gushing from a broken pipe.

In the United States, BP's stock peaked at $62.38 a share in January. The stock closed at $31.85 a share Thursday.

Governments too have lost big on an investment that, for them, has been both financial and strategic.

Bloomberg News reported that the governments of Norway, Kuwait, China, and Singapore have lost $5 billion on BP Plc's share slide since the Gulf of Mexico oil spill started in April, data compiled by Bloomberg show.

The sovereign wealth funds were four of BP's 12 largest holders of BP's London-traded shares at the start of May, the data show. Norway's state fund held 336 million shares, or 1.79 percent of the company. The Kuwait Investment Authority held 328 million shares. The People's Bank of China had 1.1 percent of BP; the Government of Singapore 1.07 percent.

BP attracted investors last year after producing more oil and gas than ExxonMobil Corp. for the first time.

The shares gained 14 percent in 2009, more than Exxon or Royal Dutch Shell Plc, its closest European rival. BP won plaudits for its ability to discover new reserves. In September, it made the biggest U.S. oil find in three years under the Gulf of Mexico.

"BP was the Goldman Sachs of the oil industry," said Christine Tiscareno, an analyst at Standard & Poor's in London. "They were attractive because they had high dividends, were winning environmental awards, and had done so well with exploration and production."



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