BP Plc canceled three quarterly payments of its $10 billion-a-year dividend after President Barack Obama demanded it put up cash for victims of the Gulf of Mexico spill. BP said it will reduce expenditures and sell more assets than planned to free up cash.
The previously announced first-quarter payment due on June 21 will be canceled, it said in a statement today. No dividend will be paid for the second and third quarters, BP said.
We “are confident that the agreement announced today will provide greater comfort of the citizens of the Gulf coast and greater clarity to BP and its shareholders,” Chairman Carl- Henric Svanberg said after a meeting with Obama in Washington today.
Svanberg and Chief Executive Officer Tony Hayward agreed to set aside $20 billion over several years to compensate victims of the spill after Obama in an Oval Office address yesterday called for the creation of a fund.
“We’ve sorted out a lot of the uncertainty, and that’s what the market didn’t like,” Peter Hitchens, an analyst at Panmure Gordon & Co. in London, said in a telephone interview. “This is a painful measure, but the market has got used to the idea.”
‘Not as Bad’
BP’s American depositary receipts were up 45 cents to $31.85 in New York trading. Earlier they touched $33. The shares are down 46 percent since the April 20 explosion aboard the Deepwater Horizon drilling rig that killed 11 workers and triggered the oil spill.
“Now that everyone is on the same side, it should restore confidence,” Panmure’s Hitchens said. “BP’s not the winner, but it’s not as bad as some people thought.”
BP’s payments accounted for about 14 percent of all dividends in the U.K.’s benchmark FTSE 100 stock index last year. Fitch Ratings yesterday lowered BP’s credit score by six grades to BBB, two levels above junk, on concern costs will escalate.