June 18, 2010 / 6:16 PM / 8 years ago

BP aims to raise cash as it struggles to plug well

LONDON/HOUSTON (Reuters) - BP Plc was seeking $7 billion in loans from banks on Friday, trying to raise more cash as it struggled to plug its gushing Gulf of Mexico well and contain the worst oil spill in U.S. history.

Banking sources told Reuters the British energy giant was seeking $1 billion in loans from each of seven banks. Earlier this week, BP bowed to President Barack Obama’s demand to set up a $20 billion fund to handle damage claims.

As the crisis entered its 60th day, the U.S. Coast Guard admiral leading the U.S. government relief effort said BP had increased the amount of oil it was siphoning off from its blown-out deep-sea well to 25,000 barrels (1.05 million gallons/3.97 million litres) on Thursday.

It was the highest amount yet collected by BP. On Wednesday, it siphoned off 18,600 barrels.

But putting that figure in context, Admiral Thad Allen said 35,000 barrels a day, and possibly as much as 60,000 barrels, were gushing from the well, which ruptured after an April 20 explosion on an offshore oil rig that killed 11 workers.

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The spill -- actually hundreds of thousands of small oil patches -- has idled much of the U.S. Gulf Coast’s multibillion dollar fishing industry and seeped into ecologically sensitive marches and wetlands despite the efforts of an army of workers to keep it at bay with oil-soaking booms.

Gulf Coast residents worried this week that BP executives’ bruising encounters with Obama at the White House and with lawmakers on Capitol Hill had diverted attention from the daily battle to clean up a spill that threatens their livelihoods.

Kenneth Feinberg, the man picked by Obama to oversee the $20 billion compensation fund, pledged during a visit to the Gulf Coast state of Mississippi on Friday to pay legitimate claims quickly.

Feinberg, who administered a federal fund for victims of the Sept. 11, 2001, attacks on the United States, said initial spill damage claims should be paid within 30 to 60 days. Claims could be filed over lost wages, business interruption, lost profits, personal injuries and even death in some instances, Feinberg said.

But the claims process is likely to pose a number of difficult questions for Feinberg.

For example, while lost revenue may be easy to quantify, how does one assess damage to future business and should BP be liable for that, too? And how will hotels with low room occupancy rates or tour operators with slow business prove the dips are due to the spill?

The establishment of the independently administered fund followed a barrage of complaints from Gulf Coast residents that the BP claims process has been too bureaucratic and has paid out too little money.


A senior banker told Reuters that BP’s reach-out to banks, including Barclays, HSBC and Royal Bank of Scotland, was part of an effort to raise capital for the claims fund.

“We do not comment on rumor and speculation,” a BP spokesperson said when asked to confirm the reports.

BP said on June 4 that it had $5 billion of cash in addition to $5.25 billion of undrawn committed bank lines and $5.25 billion of committed stand-by bank lines.

BP Chairman Carl-Henric Svanberg told Sky News Television on Friday that his company had a “strong underlying performance -- strong cash flow, strong operations.”

After falling 6.8 percent in a week of volatility driven by politics in Washington, BP’s U.S.-listed shares hovered nearly unchanged on Friday. The shares are down 26 percent so far in June in their worst month since the market crash of October 1987.

Investors appeared unimpressed by BP chief executive Tony Hayward’s performance at a U.S. congressional hearing on Thursday. Lawmakers accused him of being evasive and of failing to take responsibility for the spill.

“Hayward’s performance wasn’t great, but it could have been worse. As a shareholder, our absolute top priority is to see that all energies are being diverted to cap this wretched well,” said one top 10 investor.

Investors and analysts said Hayward may cling on despite calls by some U.S. lawmakers for BP to “clean house,” but Svanberg looked less secure.

This week, Svanberg was forced to apologize for speaking “clumsily” following a meeting with Obama by referring to those hurt by the BP oil spill as “small people.”

Some shareholders say that changing BP’s leadership now would be counterproductive when it is in the midst of a battle to cap its blown-out Macondo well.

BP hopes that a pair of relief wells now being drilled will halt the leak in August. The aim is for one or both relief wells to intersect with the leaking Macondo well to pump in heavy drilling fluids and cement to seal it.

The first relief well is within 200 feet (61 meters) of the side of the blown well, said Kent Wells, BP’s senior vice president of exploration and production. But it must be drilled down farther before it can intersect with the blown-out well, Wells said.

Additional reporting by Chris Baltimore in Houston, and Raji Menon, Sarah Young, Tom Bergin and Matt Falloon in London; Writing by Ross Colvin; Editing by Will Dunham

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