BP under pressure to suspend divi as Obama demands more

As BP meets to consider a dividend suspension, the President compares the spill to 9/11.

by
Last Updated: 31 Aug 2010

The BP board will meet today to discuss whether to cancel or defer its second-quarter dividend - and with no let-up in the emotive rhetoric State-side, the beleaguered oil giant's directors are under an awful lot of pressure to make some kind of concession. Financially, BP can probably afford to put a pile of money aside for a compensation pot and pay out to shareholders. But however rabid, hysterical and unashamedly populist the US government is being about this issue, the fact remains that politically, it's hard to see how BP can justify paying out the full whack when there's still oil pumping out of the ground. Particularly as its bargaining position seems to be getting weaker by the day...

With mid-terms looming, Barack Obama is clearly in no mood to tone down US government rhetoric towards 'British Petroleum' (though he insist he's not being anti-British, natch). Having already summoned BP's hitherto-invisible chairman Carl-Henric Svanberg to the White House this Wednesday, and called for the sacking of boss Tony Hayward, the President said this weekend that BP should put a pot of cash in the hands of an independent assessor to speed up pay-outs to those affected. And this morning, he even compared the impact of the spill to 9/11; the nuance was that it would affect environmental and energy policy as profoundly as 9/11 had shaped foreign policy, but the reference is deliberately emotive. Meanwhile, a senior US coastguard official gave BP 48 hours to come up with a new plan to staunch the spill (as if it had something better up its sleeve all along).

It's all clearly intended to ramp up the pressure on BP ahead of its board meeting today, in which it will discuss whether to press ahead with the divi payout (likely to be in the region of £1.7bn). Various alternatives are on the table if it decides not to - perhaps the most sensible of which would be to suspend it and divert the cash to the compensation pot instead. It may be a political exercise as much as anything, but that doesn't make it a bad idea – to counter this surge in ill-feeling (which has already seen it lose almost half of its value) and start re-building some bridges in the US, BP needs to start making some very visible concessions. This is surely its least bad option.

It might be unfair that BP is getting all of the blame for this (especially when Transocean, the operator of the rig, is going ahead with its own $1bn divi). But the collapse in its value has left it vulnerable, not only politically (thanks partly to our Government's rather limp refusal to get involved) but also to foreign bidders (and according to the Times, the Government has no intention of protecting it from predators). So it can’t really afford to pick any more fights with the US government, whatever the rights and wrongs of the matter.


In today's bulletin:

Osborne primed after watchdog slashes growth forecast
BP under pressure to suspend divi as Obama demands more
Majestic raises a glass to upturn in results
Russia to get the rebranding treatment
MT Expert's Ten Top Tips: Make a million before lunch

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