BP slashes dividend

obama_svanberg_bp_top.jpgBP chairman Carl-Henric Svanberg met with President Barack Obama in the Oval Office Wednesday to discuss the Gulf of Mexico oil spill. By Colin Barr, senior writer


(FORTUNE) -- BP ended weeks of speculation Wednesday by canceling its quarterly dividend for the rest of this year.

Chairman Carl-Henric Svanberg said the London-based oil giant made the decision after a White House summit with President Obama. The company agreed to set aside $20 billion over four years to pay claims tied to a massive oil spill on a deepwater well it was digging.

dividend03.png

Svanberg said the company made the decisions because "we care about the small people" affected by the spill in the Gulf of Mexico.

The decision to create the fund came as a result of "negotiation with the U.S. government officials," chief financial officer Byron Grote said on a conference call with investors and analysts.

He said he believed the decision would "provide comfort to debt and equity markets" by "creating clarity for individuals, businesses and the government."

Indeed, shares of BP (BP) -- which have lost half their value since the April rig explosion killed 11 workers and injured 17 -- rose as much as 4% after the company announced the dividend suspension. The stock finished the day up 1.4%.

BP said it remains devoted to paying a dividend and promised to revisit the issue next year, when it expects to have a better idea of how big its cleanup and legal bills will be.

But for now, the company said, it is more important to make clear that the company has the financial wherewithal to clean up its giant mess.

"From the outset we have said that we fully accepted our obligations as a responsible party," CEO Tony Hayward said in a statement. "This agreement reaffirms our commitment to do the right thing."

Also boosting the shares were reports that the giant bond fund Pimco was buying the firm's bonds, which have been under enormous stress amid worries about the company's solvency.

Wall Street has been consumed with the question of how much BP might be able to shell out without risking bankruptcy. The company has been bringing in between $26 billion and $36 billion annually in pretax profits over recent years, and was set to pay out $10 billion to shareholders this year through dividends.

Canceling that dividend will help the company raise money for the fund. BP also said Wednesday it plans to raise $10 billion over the next year by cutting back on capital spending and selling some oil production assets.

"We're taking a very financially prudent position because of the uncertainties," Grote said. "Once we've finally got the well under control, we will be able to see what an appropriate pathway for the firm is next year." To top of page

Frontline troops push for solar energy
The U.S. Marines are testing renewable energy technologies like solar to reduce costs and casualties associated with fossil fuels. Play
25 Best Places to find rich singles
Looking for Mr. or Ms. Moneybags? Hunt down the perfect mate in these wealthy cities, which are brimming with unattached professionals. More
Fun festivals: Twins to mustard to pirates!
You'll see double in Twinsburg, Ohio, and Ketchup lovers should beware in Middleton, WI. Here's some of the best and strangest town festivals. Play
Overnight Avg Rate Latest Change Last Week
30 yr fixed4.36%4.24%
15 yr fixed3.39%3.26%
5/1 ARM3.36%3.27%
30 yr refi4.34%4.22%
15 yr refi3.38%3.24%
Rate data provided
by Bankrate.com
View rates in your area
 
Find personalized rates:
Company Price Change % Change
Western Union Co 15.25 -0.80 -4.98%
Regions Financial Co... 10.22 -0.12 -1.16%
Twenty-First Century... 32.52 0.87 2.75%
Oracle Corp 40.08 -0.05 -0.12%
U.S. Bancorp 40.25 -0.22 -0.54%
Data as of Apr 17
Index Last Change % Change
Dow 16,408.54 -16.31 -0.10%
Nasdaq 4,095.52 9.29 0.23%
S&P 500 1,864.85 2.54 0.14%
Treasuries 2.70 -0.02 -0.77%
Data as of 9:20am ET
Sponsors

Sections

On eve of hearing UAW says it will no longer challenge loss in organizing election at Volkswagen's only U.S. plant. More

Obamacare sign ups hit 8 million, though final enrollment remains to be seen. More

Schwinn, Trek and Cannondale are all iconic American bicycle brands. But none of them are made in the United States. More

Getting people to donate money is a big business, and some universities, hospitals and other nonprofits are rewarding their top fundraisers with as much as $1 million to bring in the big bucks. More

Market indexes are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer LIBOR Warning: Neither BBA Enterprises Limited, nor the BBA LIBOR Contributor Banks, nor Reuters, can be held liable for any irregularity or inaccuracy of BBA LIBOR. Disclaimer. Morningstar: © 2014 Morningstar, Inc. All Rights Reserved. Disclaimer The Dow Jones IndexesSM are proprietary to and distributed by Dow Jones & Company, Inc. and have been licensed for use. All content of the Dow Jones IndexesSM © 2014 is proprietary to Dow Jones & Company, Inc. Chicago Mercantile Association. The market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. FactSet Research Systems Inc. 2014. All rights reserved. Most stock quote data provided by BATS.