BP spends $2.65B on oil spill; denies CEO quitting

Published 2:08 pm Tuesday, June 29, 2010

BP’s mounting costs for capping and cleaning up the Gulf of Mexico spill have reached $2.65 billion, it said Monday, but the oil giant denied reports out of Russia that CEO Tony Hayward is resigning.

The company’s expenses climbed $100 million per day over the weekend, according to an SEC filing Monday, as engineers eyed a tropical storm headed for the Texas-Mexico border. It was expected to miss the oil spill area but could still generate disruptive waves and winds.

It was a rocky start to the week after BP PLC stock fall 6 percent Friday in New York to a 14-year low. BP has lost more than $100 billion in market value since the deep-water drilling platform it was operating blew up April 20, killing 11 workers and starting the massive leak that has fouled the coastline in four states.

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British-based BP rushed to deny the report by Russia’s state RIA Novosti news agency, which said a senior Russian Cabinet official had said Hayward was expected to resign as chief executive.

It quoted Deputy Prime Minister Igor Sechin, before a Moscow meeting with Hayward on Monday, as saying that Hayward would introduce his successor.

BP spokeswoman Carolyn Copland in London said the report “is definitely not correct.” Sheila Williams, also in London, said, “Tony Hayward remains chief executive.”

“They are mistaken,” U.S.-based BP spokesman Mark Proegler said of the Russian report.

After the meeting, a spokesman for Sechin said Hayward’s resignation wasn’t discussed. Spokesman Rustam Kozharov said topics included the Russian joint venture TNK-BP, which accounts for about a quarter of BP’s reserves and production.

BP shares gave up some ground in London after the Russian report, but they were still up a fraction at $4.61. BP’s U.S. shares gained about 2.5 percent.

Moscow-based oil analyst Konstantin Cherepanov from the Swiss investment bank UBS said he gave little credence to reports of Hayward’s resignation.

“I’m sure there has been a misunderstanding. Hayward’s resignation at this time and in this place lacks logic,” he said.

“It would make sense that Hayward would finish his job tackling with the oil spill and step down afterwards so that the new CEO wouldn’t have his burden on his shoulders.”

In a filing Monday to U.S. securities regulators, BP said the cost of its response to the Gulf of Mexico oil spill had reached about $2.65 billion, up from $2.35 billion as of Friday. The costs include spill response, containment, relief well drilling, grants to Gulf states, claims paid, and federal costs, but not a $20 billion fund for Gulf damages the company created this month.

BP said it had received more than 80,000 claims and made almost 41,000 payments, totaling more than $128 million.

The rig drilling the relief well that’s the best hope of stopping the oil spill has made it within about 20 feet horizontally of the blown-out well that’s gushing crude, BP Senior Vice President Kent Wells said Monday.

Wells said the rig is going to drill an additional 900 feet down before crews cut in sideways and start pumping in heavy mud to try to stop the flow from the damaged well. It’s currently about 16,770 feet down.

Wells said BP is moving extremely cautiously to make sure everything is lined up correctly and the relief well is still on target to be finished in August. A second well is being drilled as a backup.

The work progressed as Tropical Storm Alex, farther southwest over the Gulf, was forecast to strengthen and become a hurricane Tuesday on a course for northeastern Mexico and a neighboring stretch of Texas.

The federal government’s point man for the spill, Coast Guard Adm. Thad Allen, said a strong enough storm could shut down drilling operations for up to 14 days. However, he said there was no immediate need to move any equipment.

“As it stands right now, absent the intervention of a hurricane, we’re still looking at mid-August” to have the relief well done, Allen said Monday.

Allen also said 10-foot to 12-foot seas could delay efforts to get a third containment system up and running, but so far that hasn’t happened.

Alex’s track is still far from the oil spill off Louisiana’s coast. But the first tropical storm of what is expected to be an active Atlantic hurricane season will still generate waves up to 15 feet high and winds of 20 to 30 mph on its outer edges that could pound the oil spill area, said Stacy Stewart, senior hurricane specialist at the National Hurricane Center in Miami.

“That could exacerbate the problem there in terms of pushing oil further inland and also perhaps hindering operations,” Stewart said.