By Joe Carroll and Jessica Resnick-Ault June 18 (Bloomberg) -- BP Plc Chief Executive Officer Tony Hayward’s failure to set safety standards to prevent the Gulf of Mexico oil spill may cost the company control over U.S. oil fields, refineries and pipelines that account for more than one-third of its sales, lawmakers and analysts said. Less than 24 hours after Hayward met President Barack Obama’s demand to set aside $20 billion to clean up and compensate victims of the worst oil spill in U.S. history, lawmakers yesterday accused the BP CEO of “stonewalling.” Hayward appeared before a House committee probing the cause of the April 20 offshore rig explosion that killed 11 workers. Citing a five-year string of accidents and deadly disasters at BP-operated facilities, Representative Bart Stupak suggested the poor safety record could justify banning the London-based company from doing business in the U.S. “Setting up the fund was a nice pro-active approach by BP, but in reality it’s going to take a decade for them to recover and regain public trust in this country,” said Jonathan Dison of Bender Consulting, a risk management and strategy firm that has advised BP, Chevron Corp. and Royal Dutch Shell Plc. Congressman Stupak didn’t elaborate on how BP could be banned from operating in the U.S. and whether such authority rests with Congress, the administration, or regulatory agencies. New Investigation Scrutiny of BP’s operations in the U.S. intensified after a fire killed 15 workers at its Texas refinery in 2005, and will increase further following the rig disaster, said John Bresland, chairman of the U.S. Chemical Safety and Hazard Investigation Board. The board added an investigation into the cause of the rig disaster to a list of federal probes into BP, Bresland said in an interview yesterday. The probe was requested by Representative Henry Waxman, a California Democrat. “Our investigation will look at 2 years before the incident, a year before it, the day before, what happened on that day, up to the time the explosion took place,” Bresland said. BP was cited for 760 safety violations in the past half decade by the U.S. Occupational Safety and Health Administration, compared with eight each for ConocoPhillips and Sunoco Inc., two for Citgo Petroleum Corp. and one for Exxon Mobil Corp., Representative John Sullivan, an Oklahoma Republican, said during yesterday’s hearing. ‘Extremely Frustrated’ Inspections of the company’s five U.S. plants after the Texas refinery fire resulted in a fine of $21 million by the Occupational Safety and Health Administration for safety violations. Last year, discovery of more violations resulted in BP being slapped with a record fine of $87.4 million. In his testimony yesterday, Hayward not only failed to convince lawmakers he was committed to making BP safer, he may have deepened suspicion of the company by repeatedly pleading ignorance to events that took place under his command, said Matt Eventoff, a partner at New Jersey communications firm, Princeton Public Speaking. “Mr. Hayward’s comments today, saying ‘I don’t know’ 66 times, evaporated any feeling of responsibility,” Eventoff said. “Any goodwill that the company bought back yesterday eroded today with his testimony.” Questioned by the panel about BP practices that may have led to the disaster, Hayward said it was too early in the investigation to know the cause. Stupak, a Michigan Democrat, told Hayward he and other committee members were “extremely frustrated with your lack of candor and inability to answer questions.” Waxman described the CEO’s responses as “stonewalling.” “I’m not stonewalling,” Hayward responded. According to a transcript of his testimony, Hayward said at least 23 times he was not involved in decisions. ‘Laser-like Focus’ After taking over from John Browne in May 2007, Hayward, now 53, pledged to apply a “laser-like focus” to improving safety at the company, declaring it one of his three top priorities along with people and performance. In Nov. 2007 he said that BP already was making “great progress” on safety. He simplified BP’s corporate structure and cut several thousand jobs. This year, at a March 2 presentation to analysts, Hayward focused on financial performance. “Our direction is clear: the unrelenting pursuit of competitive leadership in respect of cash costs, capital efficiency and margin quality,” he said. BP relied on the U.S. for the equivalent of 450,000 barrels of oil a day and is the biggest crude and gas producer in the Gulf of Mexico. The company has amassed about 500 deep-water exploration leases in the Gulf. Financial Cost BP’s American depository receipts dropped as much as 1.8 percent during the first 40 minutes of Hayward’s testimony, later closing down 14 cents at $31.71. The units have shed 48 percent of their value since the April 20 explosion and fire aboard the Deepwater Horizon rig. In earlier trading yesterday in London, BP shares rebounded 6.7 percent to 359.70 pence and the cost of insuring the company against default tumbled as investors viewed the $20 billion claim fund and suspension of dividends as bringing some clarity to the company’s financial position. Through yesterday, the shares had slumped 45 percent since the rig explosion, wiping about 55 billion pounds ($81 billion) off the company’s value. BP has spent about $1.6 billion on containing and cleaning up the spill so far. The company’s spending for cleanup and liabilities may reach $40 billion, Standard Chartered Plc estimated last week. Bond Prices BP’s bonds rose yesterday, with the spread on its 1 billion euros of 4.5 percent notes due November 2012 narrowing to 472 basis points from 664 basis points on June 16, according to Royal Bank of Scotland Group Plc prices on Bloomberg. The yield premium on its 500 million pounds of 4 percent bonds due December 2014 fell to 360 basis points from 411 basis points, HSBC Holdings Plc prices show. The company’s debt also climbed in U.S. trading. BP’s $2 billion of 3.875 percent notes maturing in 2015 gained 1/2 cent to 86.5 cents, yielding 7.308 percent, according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority. The cost of credit-default swaps protecting BP’s debt against default for one year plunged 361 basis points to 636 basis points, prices from CMA DataVision in New York show. The contracts cost 22 basis points on April 1, CMA data show. To contact the reporters on this story: Joe Carroll in Washington at jcarroll8@bloomberg.net, Jessica Resnick-Ault in New York at jresnickault@bloomberg.net

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