BP shares trading on U.S. exchanges fell more than 15 percent to a 14-year low on Wednesday on growing worries about the costs the oil company will incur after the Gulf of Mexico oil leak.

Depositary shares closed at $29.20, down $5.46 on the New York Stock Exchange, the lowest closing level since August 14, 1996. The stock has lost more than half its value since the April 20 disaster.

It seems that shares are under pressure from the fear of whether BP can survive. 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, said Jon Najarian, a founder of Web information site optionMonster.com in Chicago.

Frequently panics like this are buying opportunities but given that what is going on is one mile under the ocean no one is comfortable with the facts as presented so far.

BP's 12-month forward price-to-earnings ratio has dropped to 5.45, making it the lowest of all of the oil majors, as the losses dropped its market capitalization to $91.4 billion.

Shares gapped lower about 1:30 pm EDT, after an article appeared on Fortune magazine's website quoting oil industry analyst Matthew Simmons, questioning the company's liability for the oil spill and its ability to survive the crisis.

The company said on an analysts' conference call on Friday that it has plenty of cash to deal with the problem, and the Obama Administration has made similar comments as the company grapples with clean-up in the Gulf.

Phil Weiss, oil analyst with Argus Research in New York, said momentum was working against BP as news gets progressively worse despite the increased capture of oil from the well, though he continues to believe the company will be able to survive the crisis.

I still feel like they can, but there's more doubt in my mind than there was a week ago, he said. Momentum is a powerful thing.

Concerns that the company will have to suspend its dividend payment under pressure from U.S. politicians who say the money should go toward paying for legal claims and environmental damage in the Gulf have also contributed to the selling. In the past two days alone, seven analysts have cut their expectations on the likely payout.

The stock is in a vicious circle where the ongoing flow of negative news and political pressure begets selling, which begets more speculation about 'how bad can it be', which begets more selling, said Houston energy investment boutique Tudor Pickering Holt & Co.

Bond spreads for BP Capital Market's 5.25 percent notes due in 2013, the most actively traded and biggest decliner on Wednesday, widened by 263 basis points to record of 736 basis points over U.S. Treasuries, according to MarketAxess data.

The cost to insure the debt of BP Plc jumped to a new high on Wednesday. BP's debt protection costs were up 106 basis points on the day to 368 basis points, or $368,000 per year to insure $10 million in debt for five years, according to Markit Intraday. Earlier on Wednesday the CDS spread hit a new high of 395 basis points, Markit said.

HEAVY OPTIONS VOLUME

Patrick Mortimer, director of option trading at Pipeline Trading Systems in New Hope, Pennsylvania, said a large put option purchase in the July $32 BP strike price added pressure as market makers hedged that put trade by selling stock.

BP front-month option implied volatility has shot up 132 percent, an all time high, and July implied volatility is 111 percent as traders brace for the likelihood for more downside in the stock price in the months to come, Najarian of optionMonster said.

Option implied volatility measures the expected magnitude of share price movement and typically moves up when traders bid up option prices.

Options activity on the stock is frenzied as volume continues to grow in both call and put options across multiple expiration months, said Interactive Brokers Group equity options analyst Caitlin Duffy.

Investors are displaying a preference for put options, with roughly 1.43 puts exchanged for every single call option in play, she said.

Other stocks also associated with the Gulf spill were hit hard. Transocean , which owns the sunken rig, lost $3.75 to $42.58, while Anadarko Petroleum lost 8 percent to $34.83 a share.

BP reported about $27 billion in cash flow from operations in 2009 and total liabilities amounted to about 56 percent of total assets on its balance sheet of about $235 billion.

Oil Spill Fall