BP Shares Up 7% In Early London Trade After Spill-Fund Deal

17th Jun 2010 08:41

By Selina Williams Of DOW JONES NEWSWIRES LONDON (Dow Jones)--Shares in oil major BP PLC (BP.LN) traded up 7% in London early Thursday after the company said Wednesday it was suspending dividends and setting aside GBP20 billion to cover claims relating to its oil spill in the Gulf of Mexico. At 0737 GMT, BP shares were up 6.5%, or 22 pence, at 359 pence. On Wednesday, BP said it would cancel at least $7.8 billion in dividends, sell off $10 billion in assets and reduce capital expenditure by at least $4 billion as it looks to build up the $20 billion fund over the next 3 1/2 years. BP struck the agreement with U.S. President Barack Obama at the White House amid intense political pressure spurred by a steady stream of oil spewing into the Gulf and washing up on beaches and marshes. "BP's package agreed with President Obama should cool the politic heat and provide some degree of comfort to equity and bond markets, shareholders and businesses/residents in (the Gulf of Mexico) affected by the Deepwater Horizon accident," Evolution Securities said Thursday in a research note. "The $20 billion claims fund draws a line in the sand (of sorts). It doesn't cap BP's liabilities nor cover fines and penalties but does clarify how BP will settle legitimate claims and cleanup costs." BP will pay $3 billion into an escrow account in the third quarter of this year and another $2 billion in the fourth quarter. This will be followed by payments of $1.25 billion per quarter until the $20 billion has been paid in, BP said in a statement. The $10 billion of divestments now planned this year will focus on non-strategic assets in BP's exploration and production division, BP Chief Financial Office Byron Grote said Wednesday. BP still expects to close its $7 billion purchase of assets in the Gulf of Mexico, Brazil, Canada and Azerbaijan from Devon Energy Corp. (DVN) by the end of this year, Grote said. BP's shares have almost halved since the April 20 explosion aboard the Deepwater Horizon drilling rig that killed 11 workers and lead to the oil spill. Company Web site: http://www.bp.com -By Selina Williams, Dow Jones Newswires +44 207 842 9262; [email protected] (END) Dow Jones Newswires June 17, 2010 03:41 ET (07:41 GMT)