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U.S. Fury at BP Stirs Backlash Among British


Push for BP to Halt Dividends Hits Resistance in Britain

By JULIA WERDIGIER Published: June 10, 2010

LONDON — British investors in BP are growing increasingly frustrated with the White House’s involvement and comments about the company’s efforts to clean up the oil spill in the Gulf of Mexico, and partly blame politicians for the sharp drop in the share price.

BP’s shares, which are widely held by pension funds here, dropped 7 percent in London on Thursday because of concerns about the costs for the oil cleanup. The shares have fallen more than 40 percent since the fatal explosion at the Deepwater Horizon drilling rig in April, wiping more than £50 billion, or $73 billion, from the company’s market value.

Shares, however, were 11.9 percent higher Thursday in New York trading after falling 15.8 percent on Wednesday. The drop came after lawmakers in Washington called on BP to suspend its dividend and advertising campaign to pay for the cleanup, and a senior official said the Justice Department was “planning to take action.”

Investors in Britain were particularly furious about the suggestions that BP should not pay a dividend until it cleaned up the oil spill. BP’s dividend payment accounted for about £1 of every £8 handed out by British companies last year, according to FairPensions, a London-based charity.

Most shareholders rejected concerns that the costs of a cleanup and possible damages could force BP into Chapter 11 bankruptcy protection, and said the drop in the share price is not justified by the value of BP’s assets.

“BP has many problems in the U.S.,” Justin Urquhart Stewart, co-founder of Seven Investment Management in London, said. “One of them is that it has the word British in its title.”

In a statement on Thursday, the company reiterated that stopping the oil leak, cleaning up the spill and dealing with damage claims remained its top priority, and that it had a “significant capacity and flexibility in dealing with the cost of responding to the incident, the environmental remediation and the payment of legitimate claims.”

Regarding its recent drop in the stock markets, BP said it “is not aware of any reason which justifies this share price movement.”

BP earned more than $16 billion last year. In the first quarter of 2010 its profit more than doubled to $6.08 billion from $2.56 billion a year earlier on higher oil prices, the company said in April.

BP has said it would decide next month whether to keep the quarterly dividend at 14 cents a share for the second quarter. Last year, the company paid about $10.5 billion in dividends.

The cost of the response to the oil spill has reached about $1.43 billion, BP said Thursday, adding it was “too earlier to quantify other potential costs and liabilities associated with the incident.”

The company told investors last week that it had $5 billion cash on hand and that it was generating “significant additional cash flow” as the price of oil remains above $60 a barrel. BP had 18 billion barrels of proved reserves and 63 billion barrels of resources at the end of last year, it said.

Iain Armstrong, an analyst at investment manager Brewin Dolphin in London agreed with BP that the company has enough money to pay for the cleanup efforts and also rejected any potential concern that the company might not be able to pay for its debt.

“It’s gotten completely out of hand,” Mr. Armstrong said. “It’s a totally overpoliticized situation. There is a disconnect between reality and BP being totally lambasted.”

“Ironically, by being extremely strong financially, BP has become a target here,” he said. Mr. Armstrong said that President Obama should not forget that 40 percent of BP shares are owned by United States shareholders. “So he’s not doing them any favors either,” he said.

Peter Hitchens, a research analyst at Panmure Gordon in London, said most analysts and investors in Britain are “more relaxed” about the future of BP than their American counterparts partly because of the geographic distance. “We don’t have all the press coverage that’s over there and we’re further away from U.S. politics,” he said. “We have a more rational view.”

Indeed some investors said they see the recent decline in BP’s share price as a buying opportunity. But as oil continues to spew into the Gulf of Mexico they also acknowledge that while BP would probably be able to pay for the cleanup costs, the real question is whether it would be able to weather the political storm.

In a report Thursday, the International Energy Agency said the ongoing oil spill could prove to be a “game changer” because it could restrict future undersea oil development and limit supply.

“Emotion is understandably running high, and the way deepwater hydrocarbon developments are approved, operated and regulated will of course be thoroughly examined and potentially amended,” the agency said in its monthly oil market report.

Mr. Hitchens said the situations has now “gone beyond what’s rational” and some investors might start to fear that BP could be kicked out of the United States.

London’s mayor, Boris Johnson, said Thursday that the drop in BP’s shares was slowly becoming a political issue in Britain.

“When you consider the huge exposure of British pension funds to BP and the BP share price and the vital importance of BP then I do think it starts to become a matter of national concern if a great British company is being continually beaten up on international airwaves,” he told BBC Radio Thursday.

“What people forget is that if anyone breaks a pipeline, you’d thank god that it was a company that can actually pay for it,” Mr. Urquhart Stewart said.

Some business leaders on Thursday urged the British government to come to BP’s defense.

But Reuters quoted Prime Minister David Cameron as saying, “This is an environmental catastrophe. BP needs to do everything it can to deal with the situation, and the U.K. government stands ready to help. I completely understand the U.S. government’s frustration.”

Earlier, a spokeswoman for Mr. Cameron said the prime minister would be discussing the issue with President Obama in a weekend telephone call.

David Jolly contributed reporting from Paris.


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