As BP plc was expected to cut its dividend, shares in the company continued their downward slide Wednesday. While BP continued to cite its large cash reserves and viability, some analysts were speculating that the company would declare bankruptcy.

BP shares closed down nearly 16% Wednesday at $29.20 on the New York Stock Exchange. Trading volume was nearly 10 times the average. The company has lost half of its market value since the Deepwater Discovery drilling rig sank in the Gulf of Mexico (GOM) on April 22.

The market is worried that BP might not survive the fallout and the untallied liability from the catastrophic blowout of its Macondo well, Jon Najarian, a founder of, told Reuters. “It is not just a rumor about the potential of a dividend cut in BP anymore. Now it’s about the survivability of the company,” he said.

The devastating effects of the nation’s worst oil spill are clearly evident along the Gulf Coast as photographs of oiled and dead sea birds and other wildlife are prevalent in the news media. Some scientists assert with increasing fervor that the water under the surface of the Gulf harbors vast stretches of dispersed oil that hasn’t risen to the surface and hasn’t sunk but will create “dead zones” throughout the ocean.

Matt Simmons, principal of Houston-based boutique energy investment bank Simmons & Co., told Fortune magazine that the U.S. government should ask BP to leave the United States and that it should put the U.S. Navy in charge of the spill. “Because as long as it’s in BP’s hands, they’re going to spin the information as long as they can.”

Simmons predicted bankruptcy for BP.

“They have about a month before they declare Chapter 11. They’re going to run out of cash from lawsuits, cleanup and other expenses,” Simmons told the magazine. “One really smart thing that [President] Obama did was about three weeks ago he forced BP CEO Tony Hayward to put in writing that BP would pay for every dollar of the cleanup. But there isn’t enough money in the world to clean up the Gulf of Mexico. Once BP realizes the extent of this, my guess is that they’ll panic and go into Chapter 11.”

Analysts at Tudor, Pickering, Holt & Co. Securities Inc. (TPH) aren’t so sure.

“It feels like there is a frenzy for sources/experts/analysts to one-up each other on the assessment of fines and liability and talk about BP as a donut hole stock (zero),” TPH analysts wrote in a Wednesday morning note. “We have a really hard time getting there from a practical perspective as BP [is] worth more alive than dead to [the] U.S. government and all those that want milk from this future cash cow.

“So where can we truly find the rationale for BP to go to zero in the short term? You can’t…or if there is one, it is at BP’s discretion as a negotiating tool.”

BP will suffer mightily from spill liabilities due to its own negligence, but Anadarko Petroleum Corp., a 25% partner in the Macondo well, should remain comparatively unscathed, according to analysts at SunTrust Robinson Humphrey.

“A full investigation and adjudication of the Macondo well control incident is highly likely (90% in our opinion) to determine the operator BP was grossly negligent,” wrote the analysts. “Consequently, we believe BP will be held fully liable for the costs associated with the oil spill.

“Anadarko’s economic responsibility should be limited to the original well and two relief wells totaling plus or minus $400 million gross, or $100 million net to the company’s 25% working interest.”

The analysts said Anadarko shares are one of their top picks in the exploration and production sector given their underperformance since the well blowout and the fact that the company recently reaffirmed its guidance.

Meanwhile — following a string of failures — BP’s most recent attempt to contain some of the oil flowing from the well has shown some success (see Daily GPI, June 8). The government is pushing BP to do more.

“Now that the so-called ‘top hat’ containment system has begun to capture and recover some of the oil escaping from the wellhead, it is imperative that you put equipment, systems and processes in place to ensure that the remaining oil and gas flowing can be recovered, taking into account safety, environmental and meteorological factors,” U.S. Coast Guard Rear Admiral James Watson, the federal on-scene coordinator for the spill response, said Tuesday in a letter to BP America Exploration & Production COO Doug Suttles.

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