BP mulls dividend cut as spill costs rise

| Tuesday June 15, 2010 00:00

The company said in a statement that this figure included $60m on building barriers off the Louisiana coast.The costs update came as BP directors prepare to discuss whether to suspend dividends to shareholders. The firm is under intense pressure from the US government, which wants BP to use the money to pay for the Gulf of Mexico clean-up. BP is also facing a raft of lawsuits, some of which have already been filed. The latest announcement on costs does not include any estimate of potential legal bills. Its shares fell by more than 5% in London yesterday.

The company's value has almost halved since the Deepwater Horizon rig exploded on 20 April and sank off the coast of Louisiana, killing 11 workers.

The BP board will discuss the dividend during a teleconference. No decision is expected to be announced immediately.

BP bosses are due to meet President Barack Obama tomorrow. Obama wants BP to pay money into a ring-fenced fund to compensate those with 'legitimate' damages claims. The company said yesterday that its response to the incident has so far cost $1.6bn (£1.1bn). Much of that is linked to the clean-up operation - but it said it had paid 26,500 claims totalling $62m. Last week President Obama accused the oil firm of 'nickel and diming' Gulf residents while planning big dividends for investors. BP's meeting comes as the president begins a two-day visit to the Gulf Coast to view the damage from the slick. BBC business editor Robert Peston has said it is looking increasingly likely that BP will stop paying dividends to shareholders - worth about £1.8bn per quarter - until it can quantify the final bill for the Gulf of Mexico spill and can 'prove to the White House that it can afford those enormous costs'.

The National Association of Pension Funds (NAPF) estimates that UK pension funds' exposure to BP was only about 1.5% of their total assets, which are worth more than £800bn.But it said that the continued withholding of dividends would be a 'real issue'.-(BBC)