FALLING hard wsj>BP Investors Brace for Dividend Suspension
* UNE 9, 2010, 12:37 P.M. ET
Shares in BP PLC tumbled as much as 6% Wednesday as political pressure on the company over its handling of the Gulf of Mexico oil spill mounted and investors worried it might be forced to suspend its dividend.
BP shares fell to their lowest level in more than seven years, a day after President Barack Obama said that he would have fired BP Chief Executive Tony Hayward by now if he worked for him. They later recovered somewhat, closing down 4% in London.
The U.S. government's point man on the oil spill, Adm. Thad Allen, joined the chorus of criticism Wednesday, demanding BP provide more detail on how it's meeting damage claims from individuals and businesses impacted by the spill.
Shareholders are now increasingly bracing for the possibility that BP will be forced to reduce or even cancel its dividend, a key income source for investors and savers in the U.K.
Politicians in the U.S. say BP should be using all its resources to stop the spill and clean up the Gulf, not rewarding shareholders. In a research note Monday, Goldman Sachs analysts said they now expect BP to take a holiday on the dividend for the next two quarters, while uncertainties over damages remain high, and resume payments in the fourth quarter at a reduced rate. They peg the total cleanup and legal costs to BP at around $33 billion, though these might not fully materialize for a decade.
t said it is now collecting a little more than 15,000 barrels a day, following the installation of a new containment cap last week which channels oil and gas up to a vessel on the surface.
The ship only has the capacity to process about 18,000 barrels of oil a day, but Adm. Allen said Wednesday that additions to the system will raise that to 28,000 barrels a day by next week as BP brings in more ships and equipment.
A permanent solution to the leak will only come with the completion of a relief well, which is due to be finished in August.
In another sign of the Obama administration's new get-tough approach to BP, Rear Admiral James Watson of the U.S. Coast Guard wrote to the company demanding details of its oil-recovery plans within 72 hours. He said it was "imperative" BP put equipment, systems and processes in place to ensure the oil and gas still not being captured by the new containment system be recovered.
Members of Adm. Allen's team were set to meet BP's senior claims team Wednesday to request detailed information on how claims were being evaluated and how quickly they were being processed.
In a letter to Mr. Hayward published Wednesday, Adm. Allen said the government needed "more detail and openness from BP" to ensure it was meeting its commitment to restore the Gulf Coast.
The letter came amid complaints that BP had been slow to pay claims by residents affected by the spill. During a trip to Louisiana last week, President Obama warned BP not to "nickel and dime" claimants.
The company has pledged to honor all legitimate claims for compensation, and says that as of June 7 it had paid nearly $49 million and issued nearly 18,000 checks to those impacted by the spill, such as fishermen and small businesses. It says that to date, it has not denied any claim.
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