UPDATE: BP Unlikely To Return To Bumper Dividend Despite Settlement
March 04 2012 - 3:29PM
Dow Jones News
BP PLC (BP.LN, BP) expects to keep raising its dividend as the
company's fortunes improve, but the U.K. oil major is unlikely to
return to paying shareholders the large returns that it did before
the Gulf of Mexico oil spill, a person close to the company said
Sunday.
BP, which Saturday agreed to a $7.8 billion potential settlement
with thousands of individuals and businesses affected by the
Deepwater Horizon disaster, will "increase the dividend with the
growth in underlying earnings," the person said.
The comments echo similar pronouncements made by Chief Executive
Bob Dudley in an interview with the Sunday Telegraph newspaper two
weeks ago.
While Saturday's settlement--albeit with only one of BP's
litigants--removes "a layer of uncertainty" for the company, it
also falls within an anticipated amount set aside on its balance
sheet for almost the past two years.
BP last month raised its dividend for the first time since the
spill, a move that CEO Dudley said at the time reflected the
company's return to "operational momentum." The 14% increase
mirrored a similar rise in its earnings on a comparative basis a
year ago.
However, the person cautioned that while the payout would likely
rise in line with earnings, it was "highly unlikely" that it would
return to the levels seen before the incident.
BP's previous dividend policy was one of the most generous in
the U.K.--it paid $10.5 billion in 2009 before the oil spill--but
the dividend was halted for nine months in the immediate aftermath
of the disaster. When it resumed, it was only at half the level it
was before the suspension.
BP is a smaller company now, having sold more than $22 billion
of assets and provisioned costs of nearly $40 billion for the total
bill of cleaning up the Gulf of Mexico and settling with claimants,
the person said, adding it was unrealistic to expect things to
return to how they were.
"We don't comment on future dividend levels, but generally we
would expect to have a progressive dividend policy, in line with
the improving circumstances of the firm," said BP spokesman Toby
Odone.
The company, whose dividend payments have historically been a
major source of revenue for U.K. pension funds, still faces claims
against it by the U.S. Department of Justice or other federal
agencies for violations of the Clean Water Act, and possibly by the
states and local governments. According to The Wall Street Journal,
BP has been in off-and-on discussions with the government about
those issues in the past.
It is also in litigation with its Deepwater Horizon contractors,
Halliburton Co. (HAL) and Transocean Ltd. (RIG, RIGN.VX), and
blowout preventer maker Cameron International Corp. (CAM)
Following the settlement, the start of a civil trial to
determine blame for the incident--due to start last Monday--was
adjourned by the judge hearing the case. A new date has not yet
been set.
BP's dividend made up 14% of total shareholder payout on
London's FTSE 100 index in 2009.
-By Alexis Flynn, Dow Jones Newswires;
+44 207 8429471; alexis.flynn@dowjones.com
--Tom Fowler of The Wall Street Journal contributed to this
article.
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