Published: Jun 10, 2010 11:50 AM EDT
Updated: Jun 10, 2010 8:50 AM EDT

LONDON (AP) - Shares in BP plunged again in early trading in

London - extending a sell-off in New York - as U.S. political

pressure intensified on the British oil company to halt dividend

payments and fork out greater compensation for the Gulf of Mexico

oil spill.

The stock had dropped as much as 11 percent to a 13-year low at

the opening as experts warned dividend payouts would likely be

postponed. However, it recovered some ground by midmorning, trading

4.3 percent lower at 374.50 pence ($5.47), as analysts suggested

the sell-off was overdone.

Some investors also fretted about the rising costs facing BP

after President Barack Obama's administration suggested it should

pay unemployment benefits to thousands of oil workers laid off

during a moratorium on deep-sea drilling triggered by the spill.

BP tried to reassure investors before the London Stock Exchange

opened, saying it was in a strong financial position and it saw no

reason to justify the U.S. sell-off, and many analysts agree that

the company can withstand the crisis.

But most market experts also acknowledge that the political

rhetoric surrounding the accident was outweighing financial


"We don't believe BP has a funding issue but given the

overwhelmingly hostile nature of the U.S. government the company

may decide to suspend payments until the wells are capped and the

clean-up sufficiently advanced to convince the US that it can

afford all the costs as well as pay dividends," said Evolution

Securities analyst Richard Griffith. "Unilateral action against BP

over its U.S. operations, be it unreasonable or illegal, hangs over


Robert Talbut, the chief investment officer at Royal London

Asset Management, a shareholder in BP, said that "there is a lot

of very irrational and short-term selling going on." But he added

that talk of a potential sale of assets or takeover bid -

PetroChina Ltd. has been suggested by some analysts as a potential

suitor - was not surprising.

"I can understand exactly why someone else would want to buy

the BP assets because I think they are grossly undervalued at the

moment," he said. "As a shareholder, it's not something I would


The politics of the spill crossed the Atlantic on Thursday, with

London Mayor Boris Johnson expressing concern about the

"anti-British rhetoric that seems to be permeating from America."

Johnson said that BP was paying a "very, very heavy price" for

an accident.

"I would like to see a bit of cool heads rather than endlessly

buck-passing and name-calling," Johnson told BBC Radio. "When you

consider the huge exposure of British pension funds to BP it starts

to become a matter of national concern if a great British company

is being continually beaten up on the airwaves."

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 percent of BP's

shareholders are based in the U.S.

BP, which earned more than $16 billion last year, said Thursday

that the cost of the clean-up and containment efforts had now hit

$1.43 billion.

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.

BP stressed on Thurday that it had "significant capacity and

flexibility" to deal with ongoing costs, underlining its

additional cash flow, strong debt to equity ratio and proven


The company reminded investors that it had indicated in March -

before the explosion at the Deepwater Horizon rig - that its cash

inflows and outflows were balanced at an oil price of around $60

per barrel.

It said its gearing was currently below the bottom of its

targeted range and its asset base was "strong and valuable." The

company had more than 18 million barrels of proven reserves and 63

billion barrels of resources at the end of 2009.

The share price falls in London and New York have wiped out

around half the company's market value.