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BP shares up as it bows to US pressure to cut 2010 dividends
(Update with opening share price) BP has confirmed it will not pay a dividend due Monday and will not pay any other dividends in 2010 after it agreed to US demands to place $20 billion into a US compensation fund.
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BP has cancelled the first quarter dividend due on Monday and said it will not pay a dividend for the next two quarters after it bowed to US government pressure to pay at least $20 billion (£13.5 billion) into a escrow fund to cover compensation claims following the US oil catastrophe.
BP shares rose 22p, or 6.59%, to 359.1p after the news which BP said provided greater clarity for everyone concerned about the incident in the Gulf of Mexico.
BP's chairman Carl-Henric Svanberg said: 'We regret the cancellation and suspension of the dividends, but we concluded it was in the best interests of the company and its shareholders.'
The group's finance director Byron Grote held a conference call with investors late last night and said he hoped the move would bring clarity for people in the US, for the US government and for BP investors affected by the spill from the BP-owned well in the Gulf of Mexico.
The figure was finalised during a meeting between the US President Barack Obama and BP bosses, including chief executive Tony Hayward and chairman Carl-Henric Svanberg.
Obama said the fund would give claimants substantial assurance of compensation, but it does not represent a cap. Nor will the fund ot cover any fines and penalties that full due from the disaster that killed eleven workers at the end of April.
The independent fund will be managed by lawyer Kenneth Feinberg, who oversaw payments to families of victims of the September 11, 2001 terrorist attacks, the BBC said.
BP will pay money ito the fund over three years, paying in $5 billion this year and $1.25 billion per quarter thereafter.
BP has also agreed to sell $10 billion worth of non-core, upstream assets.
Seymour Pierce downgraded BP to 'hold;' from 'buy', UBS repesated its 'buy' rating but cut its price target to 525p from 580p.
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11 comments so far. Why not have your say?
Private Investor
Jun 17, 2010 at 09:57
I am amazed that the dividend due on Monday has been cancelled after the shares have gone ex-div as this creates a false market. When Northern Rock wanted to pay a dividend before it failed there was great concern to may the decision to cancel before the shares theoretically went ex-div. To do what BP has done can only be justified on the basis of impending insolvency. Further, selling assets and cutting cap-ex represents a part winding down of the company. This does not make sense if the aim is to allow BP to generate cash to pay the $60 bn in compensation and fines that the disaster is eventually expected to cost it.
report thisAnonymous 1 needed this 'off the record'
Jun 17, 2010 at 10:09
The USA got lucky! If a smaller oil company had had this disaster - who would pay? Perhaps there needs to be an International Oil Fund, provided by all companies to be available to deal with major spills and similar disasters!
report thisAnonymous 2 needed this 'off the record'
Jun 17, 2010 at 10:28
What Next For BP? Are we following what others are saying? Is the Top Earners And all the Executives Will Cut Thier Salary Too>>BONUSES TOO
report thisJohn C
Jun 17, 2010 at 10:53
Well Mr. Obama that compares very favourably with the $450 million paid by Union Carbide for Bhopal, the $500 million paid for Exxon Valdez, the £3million paid for the Torrey Canyon and peanuts for Piper Alpha. The hypocrisy stinks. As a national newspaper said last week when disaster strikes the US will never take the blame.
report thisOrlando Furioso
Jun 17, 2010 at 11:01
Obama has been conspicuously quiet following the completion of the court case in India on the Bhopal disaster that was caused by an American company and that has finished up paying buttons to those 15,000 or so injured, blinded and disabled and to the families of those who died.
And America still gives refuge to the chairman of the company who should accept responsibility - Obama is chasing the chairman of BP so why not his fellow countryman?
America - land of the free... ('to mess with the world as we like and no nasty foreigner is going to make us pay for the damage we cause...')
report thisDJM
Jun 17, 2010 at 11:18
So now you know why Americans (as a Nation not individuals) are loathed all around the Middle East and beyond - they would not recognise a level playing field if they tripped over it - am I biased? no, all my family live in the USA and are US citizens too and are perennially embarrassed by US foreign policy.
Trouble is we need them far more than they need the UK...
report thisdave sullivan
Jun 17, 2010 at 12:16
I wonder what would have been said if this was a russian company? or a chinese one?
So much for a special relationship! A bit of a one way street!!!!!
report thisJoe Bloggs
Jun 17, 2010 at 12:29
I do not think that is going to end there, this is only the start, and I managed to offload all my holding in this releif rally.
Where theres blame there is a claim.
Lets pull our troops out of Afghanistan, and teach the yanks a lesson.
report thisIvor Nestegg
Jun 17, 2010 at 12:50
1) I hate to say I told you so BUT remember that only last Friday you were running a "BP Quashes Rumours" thread denying that the dividend would be suspended (or at least that a decision to do so had been taken) which seems absurd in view of what has happened.
2) In general BP's last thought seems to have been for its shareholders who
* Have lost their dividends
* Will lose $10 billion of "non core assets"
* Have agreed to hand over $20 billion to Mr Feinberg's Compensation Fund over the next 3 years
All in exchange for what? No cap on the compensation and no amnesty on fines and clean up costs.
You owe them an explanation Mr Svanberg!
report thisJohn H
Jun 17, 2010 at 14:59
I can't understrand why BP is taking all the flak. The rig was owned and operated by an American company with mainly Americans running it and the blowout preventer was designed and built by Americans.
Obama is obviously floundering in a wave of unpopularity and he'll be even more unpopular with the American shareholders.
America is not really our particular friend, how can we be friendly with a country that supported the IRA, befriended our weak minded Prime Minister and dragged us into two unnecessary wars and then this.
Properly run, the UK is better able to look after itself without the EU and America.
report thisAnonymous 2 needed this 'off the record'
Jun 18, 2010 at 08:11
A Thought, is there any insurance taking up on this project, and if not why? a limited damages should be in Place!
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