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>>MORE Carnage? BP shares fall sharply in London

By JANE WARDELL (AP) – 22 minutes ago

LONDON — Shares in BP PLC are falling sharply at the start of trading in London after a huge sell-off in New York amid fears about the rising costs facing the company over the Gulf of Mexico oil spill.

The stock is trading down at 9.3 percent at 355 pence ($5.18) in early trade.

Investors are worried about the payment of the company's planned dividends and its ability to pay for the disaster as U.S. political pressure increases for greater compensation.

BP had attempted to reassure investors before the market opened, saying it is in a strong financial position and it saw no reason to justify the sell-off in the U.S., where shares tumbled to their lowest level in a decade on Wednesday.

THIS IS A BREAKING NEWS UPDATE. Check back soon for further information. AP's earlier story is below.

LONDON (AP) — BP PLC sought to reassure investors on Thursday after its shares took a dive in U.S. trading, saying it isn't aware of any reason to justify the sell-off.

In a statement released before the London Stock Exchange opened for trading, the company underlined its strong financial position and said it has "significant capacity and flexibility" to deal with the cost of responding to the Gulf of Mexico oil spill.

BP shares tumbled Wednesday to their lowest level in more than a decade in New York trade on fears the company won't pay out its planned dividends and wider speculation about its ability to pay for the disaster. The stock recorded a smaller fall in London.

"BP notes the fall in its share price in U.S. trading last night," the company said in the statement. "The company is not aware of any reason which justifies this share price movement."

"BP faces this situation as a strong company," it said. "Under the current trading environment, we are generating significant additional cash flow."

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.

BP said those strong financials gave it "significant capacity and flexibility in dealing with the cost of responding to the incident, the environmental remediation and the payment of legitimate claims."

The stock dropped $5.45, or 16 percent, to close at $29.20 in New York on Wednesday — easily its worst day since the rig exploded seven weeks ago. The company has lost half its market value, a stunning $95 billion, in that time. It posted a smaller 4.2 percent fall in London to close at 391.55 pence ($5.71).

BP, which earned more than $16 billion last year, has already spent more than $1 billion dealing with the disaster. CEO Tony Hayward last week wouldn't estimate the total bill, though he told analysts that minority partners like Anadarko would be expected to pay as well.

Political pressure is building on the British company to slash its dividend or suspend it altogether until the well is capped and hundreds of miles (kilometers) of coastline have been cleaned up. Some investors worry the billions of dollars in liabilities could wipe the company out.

Estimates for the total cost of the spill grow with every barrel that BP's failed well belches into the Gulf and with each oil-covered pelican or turtle that washes up on a devastated beach.

U.S. Interior Secretary Ken Salazar upped the ante on Thursday, promising a Congressional hearing into the spill to ask BP to compensate energy companies for losses if they have to lay off workers or suffer economically because of the Obama administration's six-month moratorium on deepwater drilling.

Cutting the dividend would have a big impact in Britain. BP 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 hasn't said whether it would approve a payout for the second quarter.

BP said it would continue to keep the market updated on the oil spill — its top priority — through regular announcements.

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