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BP suspends dividends for the rest of the year

BP PLC says it will suspend its dividend for the rest of this year and set up a $20 billion fund to assure victims of the gulf oil spill that they will be compensated for their losses.

The British oil giant also will cut spending and sell some assets to deal with the cleanup and compensation costs, which have already hit $1.75 billion.

BP chairman Carl-Henric Svanberg announced the moves Wednesday after emerging from the White House, where he and other BP executives met for four hours with President Barack Obama.

The agreement resolved some lingering issues for shareholders, but wasn't totally reassuring. BP shares rose more than 5 percent to $33 after Obama said it was in everyone's best interests that BP remains a "strong and viable company." But they then slipped back as investors digested the full extent of BP's commitments, ending the day with a gain of 45 cents to close at $31.85.

Company officials canceled first-quarter dividends — totaling about $2.6 billion — scheduled for payment next week, and added that they won't declare a dividend for the second or third quarters either. Obama and key members of Congress in recent weeks have pressed BP to suspend the dividend payment, making Wednesday's action all but inevitable.

Chief financial officer Byron Grote said BP was financially able to pay both dividends and costs from the spill, but it was prudent and conservative to suspend the payments to shareholders.

BP was expected to pay about $10.5 billion in dividends this year. It estimated that its cash flow for 2010, excluding costs from the gulf disaster, would top $30 billion.

Analysts said the deal between BP and the White House could lift political uncertainty that had weighed down BP shares, which have fallen by nearly half since the April 20 well blowout that killed 11 workers and triggered the worst oil spill in U.S. history.

BP officials said they will reconsider dividends early next year after they see fourth-quarter 2010 results and know more about the company's spill-related liabilities. Grote said the company expects its partners on the fatal project "to meet their obligations as well."

Anadarko Petroleum Corp. of Texas had a 25 percent interest in the well and a subsidiary of Mitsui & Co. Ltd. had a 10 percent stake. Other companies that could be liable include Switzerland's Transocean Ltd., which owned the drilling rig that BP operated, and subcontractors on the job including Halliburton Co.

BP suspends dividends for the rest of the year 06/16/10 [Last modified: Wednesday, June 16, 2010 11:46pm]

    

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