Investors bailed out of BP shares Wednesday, as concern grew about the costs it will be forced to cover by the U.S. government for damage from the massive oil spill in the Gulf of Mexico and the resulting cleanup.
U.S. Interior Secretary Ken Salazar on Wednesday said that BP will have to pay the salaries of any oil services workers who lose their jobs due to the spill.
As well, estimates of the amount of oil flowing from its well blowout in the Gulf of Mexico grew.
In Washington, the point man for the U.S. government's response to the oil spill said BP is now capturing more than 630,000 gallons per day from the gushing well.
Coast Guard Admiral Thad Allen's elevated figure means that both BP and the government may have vastly underestimated the total that's spilled into the Gulf up to now.
10 times usual volume
The stock dropped $5.48, or almost 16 per cent, to close at $29.20 on the New York Stock Exchange, with 238 million shares changing hands — almost 10 times its usual daily volume.
BP's share price is now at its lowest in 14 years. It has lost half its value since the April 20 rig explosion off the Louisiana coast.
"It's in freefall," Fadel Gheit, energy analyst with Oppenheimer & Co, said of BP stock. "There's an old saying: 'Don't try to catch a falling knife."'
However, Gheit said investors are overlooking the fact that BP has deep enough pockets to pay for the spill, fines and damages. It's also able to borrow another $15 billion if needed, he said.
Shareholders fear BP will stop paying its dividend to conserve cash. The company is scheduled to make a $2.63 billion payout on June 21.
BP told investors on Friday that it has "considerable firepower" to cover the cost of the Gulf spill and give funds to investors.
Since then, U.S. President Barack Obama has referred to the dividend a number of times in his criticism of BP.
A group of about 30 U.S. lawmakers joined the fray Wednesday, sending an open letter to BP chief executive Tony Hayward asking him to suspend dividend payments and advertising campaigns until the well is capped and the spill has been cleaned up.
"Not a moment before then should you return to business as usual," the House of Representatives members wrote in the letter.
Cutting the dividend would have a big impact in Britain, as BP accounts for around 12 to 13 per cent of payments from companies in the blue-chip FTSE 100 index, providing crucial income for millions of retirement accounts.
In addition, about 40 per cent of BP's shareholders are based in the U.S.