June 4, 2010 / 1:28 PM / 9 years ago

BP resists pressure to cut dividend

LONDON (Reuters) - British oil company BP Plc (BP.L) resisted political pressure to stop dividend payouts on Friday as oil continued to spill from one of its wells into the Gulf of Mexico.

A Great Blue Heron flies past protective booms at Gulf Islands National Seashore in Florida, June 3, 2010. REUTERS/Lee Celano

“We fully understand the importance of our dividend to our shareholders,” BP said in a statement as efforts continued to contain the crude leak from one of its deepwater operations.

“Future decisions on the quarterly dividend will be made by the board, as they always have been, on the basis of the circumstances at the time.” .

BP is due to announce its second quarter dividend and results on July 27.

BP is under political pressure to suspend dividend payments — which total $10.5 billion a year — after two U.S. Senators called on it not to pay out to shareholders until the full costs for cleaning up the massive spill are known.

Most analysts believe the company can foot the bill without cutting its dividend, and some saw Friday’s statement as a reassurance on that front.

“My take on the underlying message is that the dividend is safe given the strong cash flow and gearing headroom,” said Alan Sinclair of Seymour Pierce in London.

Analyst forecasts for the total cost of the spill range from $5.3 billion, an estimate from Dutch bank ING should the current effort to plug the well work, to $37 billion from investment bank Credit Suisse. BP generated cash of $7.7 billion in the first quarter.

At 1450 GMT, BP shares stood 0.8 percent higher at 436 pence, off their highs of the day but supported by news that a cap had been placed over the leaking well and was funneling oil to the surface.

BP hopes its latest attempt to control the spill, placing a containment cap over a hole on the ruptured wellhead, will stop oil spewing from the deep-sea well, where an explosion on April 20 has caused the biggest oil spill in U.S. history.

The company refused to estimate the total cost of the operation, cleanup and compensation costs, but said a provision would be made in second quarter results and it would be taking charges for the spill for “a long period of time.”

“STRONG COMPANY”

BP has lost around a third of its market value or 40 billion pounds ($59 billion) in the last six weeks. The company has also suffered downgrades to its debt rating but Chief Executive Tony Hayward dismissed suggestions its premium status was under threat.

“The financial consequences of this incident will undoubtedly be severe, but BP is a strong company and we have weathered many storms before,” Hayward said.

“I’ve talked on several occasions about the strength of the underlying cash flow of the group,” he said. “We’ve tried to maintain a conservative balance sheet. It’s certainly our intention to maintain a double A rating.”

Additional reporting by Paul Hoskins, Myles Neligan, Matt Scuffham and Tom Bergin; writing by Andrew Callus

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