4th UPDATE:BP Shares Close -9.3% As Market Awaits Dividend News

14th Jun 2010 18:19

(Adds analyst comment, updates throughout.) By James Herron Of DOW JONES NEWSWIRES LONDON (Dow Jones)--BP PLC's (BP) London-listed shares closed more than 9% lower Monday as U.S. politicians continued to pressure the company to set aside billions of dollars for clean-up and compensation related to the ongoing Gulf of Mexico oil spill. BP shares had recovered from a brief collapse late last week after the U.K. government gave its first public support to the embattled company, and Chief Executive Tony Hayward said the company's board was considering bowing to political pressure to cut or defer dividend payments. However, shares slumped again Monday as Senate Democrats asked BP to set aside $20 billion in a special account for economic damages and clean-up costs. That figure dwarfs the $1.6 billion BP has spent since April 20 on containment, cleanup and compensation resulting from the oil spill and is at the high end of analysts' estimates of the ultimate liability. Despite the intense political pressure and calls from analysts and investors to improve BP's relationship with the U.S. authorities by offering some kind of concession, BP said its Monday board meeting is not expected to reach a decision on whether to go ahead with its $2.6 billion second quarter payout to shareholders. BP could afford to satisfy Congress' demand for a $20 billion fund, even though the figure is high, said Oppenheimer & Co. analyst Fadel Gheit. "The suspension of the dividend would free up $10 billion and BP has $10 billion to $15 billion additional borrowing capacity that can be made available in a few days," he said. Most analysts say BP's financial position is strong enough to meet all the Gulf oil spill liabilities and continue to pay a dividend. At the end of the first quarter BP said it had cash and cash equivalents on its balance sheet totaling $6.8 billion and its ratio of debt to debt plus equity was just 19%. BP Chairman Carl-Henric Svanberg is due to meet with President Barack Obama Wednesday to discuss the company's response to the spill, which has been declared the worst environmental disaster in U.S. history. White House officials Sunday have said they wanted BP to put "substantial" funds into an escrow account to cover claims and U.S. lawmakers also have demanded it suspend dividend payments until the crisis is over. Analysts estimate the full cost of the spill at anywhere between $3 billion and $30 billion. BP could also face civil penalties of up to $1,100 a barrel of oil spilled, rising to $4,300 a barrel if criminal negligence were to be proved. Based on the current spill estimate of 40,000 barrels a day, these maximum penalties now total $2.3 billion and $9.1 billion respectively. BP's shares Monday fell as much as 10.5% before closing down 36 pence, or 9.3%, at 355 pence. London's blue-chip FTSE100 index was up 0.7%. -By James Herron, Dow Jones Newswires; +44 (0)20 7842 9317; [email protected] (END) Dow Jones Newswires June 14, 2010 13:19 ET (17:19 GMT)