BP shares rebounded Thursday after a sharp fall the day earlier.

They gained $3.58, or more than 12 per cent, to close at $32.78 US on the New York Stock Exchange over the noon hour.

BP CEO Tony Hayward talks to Jose Rivera, a cleanup worker, on May 30 in Venice, La. Hayward says minority partners in the Deepwater Horizon drilling project are expected to share in paying compensation. (Gerald Herbert/Associated Press)

Even with the bounce back, BP is still down 47 per cent from its 52-week high.

Analysts said Wednesday's 15.8 per cent sell-off on fears that the company would be crippled by the costs of cleaning up and paying compensation for the massive oil spill in the Gulf of Mexico was an overreaction.

The shares plummeted as U.S. politicians pressed the British oil company to halt its dividend payments and pay greater compensation for American workers and companies devastated by the massive Gulf of Mexico oil spill.

The company has found itself caught in a transatlantic squeeze between an angry U.S. administration and unhappy shareholders — some 18 million Britons hold shares or pension funds in the company.

U.K., U.S. leaders to confer on weekend

Prime Minister David Cameron's office said the British leader would discuss the issue with U.S. President Barack Obama during a scheduled telephone call over the weekend.

"I understand the U.S. government's frustration because it is a catastrophe for the environment," Cameron said Thursday while on a visit to Afghanistan.

Robert Talbut, the chief investment officer at Royal London Asset Management, a shareholder in BP, said "there is a lot of very irrational and short-term selling going on."

Cutting the dividend would have a big impact in Britain, where the company accounts for about an eighth of dividend payments from companies in that country's blue-chip stock index, providing crucial income for retirees. In addition, about 40 per cent of BP's shareholders are based in the U.S.

Speaking to investors last week, CEO Tony Hayward wouldn't estimate the total bill, though he told analysts that minority partners in the rig would be expected to pay as well.

With files from The Associated Press