As vultures are circling, BP nears day of destiny (News Feature)

By Anna Tomforde Jul 12, 2010, 14:55 GMT

London - In normal times, a bounce in the BP share price might have signalled a spectacular oil strike. But given the current uncertainty over the oil giant's future, the relative recovery can only accelerate the race against time over its destiny.

BP shares jumped by 20 per cent last week, and continued their rise Monday, to 390 pence - its highest level in a month - but still far below the pre-crisis level of around 680 pence.

While the trend could reflect rising hopes that BP could succeed in capping the leak in the Gulf of Mexico in the near future, it also narrows the window of opportunity for any prospective bidder, analysts noted.

'Hopefully, we have turned a corner and are moving from a position that so far has been very defensive, to one where the company is dealing with the effects of a finite event,' a BP source told the Daily Telegraph Monday.

The share price movement coincides with unconfirmed reports that ExxonMobil, the world's biggest oil company, has asked the US government for permission to explore an acquisition of BP.

According to reports, the US government, much angered by BP's handling of the April 20 oil spill, has indicated that it would not stand in the way of any offers made by ExxonMobil, or by Chevron, another US company reported to be interested in BP.

Any such liaison could create an oil industry supergiant worth up to 400 billion dollars, reports said.

'No doubt any move by an American predator for BP would be political dynamite,' commented the Daily Telegraph. Given that BP, Britain's biggest single company, was a 'strategic asset to the nation,' the government would come under intense pressure to intervene, the paper predicted.

The government has, meanwhile been at pains to play down the impression that it was feverishly working on contingency plans in the event of a collapse of BP - through takeover, break-up or corporate failure.

'It is not clear how bad this will get, but the government needs to be prepared for every eventuality,' an official said.

BP, whose value has more than halved since the accident, has liabilities of up to 70 billion dollars, according to estimates by its advisers, Goldman Sachs.

In addition to its worldwide interests, BP shares are crucial to British pension funds. The company also owns much of the country's energy infrastructure, including a pipeline system connection more than 50 oil and gas fields in the North Sea.

BP employs more than 10,000 people in Britain alone and generated tax revenue of 8.7 billion dollars last year.

'A US bid for BP would be a clear infringement of competition rules and would be evidence of favouritism from a government afraid that a Russian, Chinese or Middle Eastern government could take a significant stake in assets offshore the US,' the financial publishing group Citywire said in a commentary Monday.

It argued that there was a legitimate role for the British government to make sure that, in the wider public interest and in the interest of competition, damaging takeovers did not place.

Meanwhile, BP is continuing to work on what experts have described as the 'mother of all defence strategies' ahead of its crucial presentation of second-quarter results on July 27.

On that day, BP hopes to demonstrate its strong liquidity by providing a clear outline of its operational and financial position, and by announcing a possible doubling of its current asset disposal scheme of 10 billion dollars, reports said.

The Financial Times Monday described July 27 as 'BP's date with destiny,' while quoting industry experts as saying that a bid for BP 'is unlikely, though not impossible.'