BP defiant on dividend as oil spill may be contained

BP has succeeded in placing a funnel over the leaking Macondo oil well, but it will be up to 24 hours before it is known whether the procedure will allow most of the spilled oil to be collected, as intended.

Submersible robots cut a length of broken pipe above the blowout
preventer valve, the source of the oil spill on the sea floor. A
funnel was then lowered into place, which it is hoped will allow the
oil to be piped up to a drillship, the Discoverer Enterprise (above) on the sea's surface, where it will be processed.

The development is only a temporary fix, however. The spill will only be permanently plugged when one of two relief wells currently being drilled intersects with the damaged well and concrete is pumped down to seal it. This is unlikely to be completed before August.

If the funnel measure is successful, it will go some way to relieving
the intense pressure on BP CEO Tony Hayward, who is expected to
announce today that the oil giant will be paying more than $10.5bn
(£7bn) worth of dividends to its shareholders this year. The
announcement would be controversial, given that US senators have demanded BP halt any dividend payments until the full cost of the clean-up is known.

So far, the disaster has cost BP close to $1bn. Analysts estimate the final cost, including fines, could be up to $60bn (£40bn), although $10-20bn is a more realistic liability. This is set against BP's 2009 profits of $13.96bn (£10bn), for which investors were expecting the $10.5bn dividend payout.

But BP has to protect its share price and paying its dividend is seen
as a way of preventing a further investor sell off following the
nearly 30 per cent fall in the company’s market capitalisation since
the oil spill began with a fatal explosion on the Deepwater Horizon
oil rig in April.

Apart from that, the US accounts for only a third of BP's operations,
which suggests appeasing the reportedly very angry President Barack Obama by cancelling the dividend would be disproportionate.

The trouble for BP, according to Alex Stewart of Evolution Securities, is that it reports its results - and quarterly dividends - on July 27. The Macondo oil well could be capped permanently by then, but the likelihood is that it won't be until August.

"It's not going to look good paying about $3bn in [quarterly]
dividends to shareholders if at the same time local fishermen are
having their livelihoods destroyed in the Gulf," Stewart told the
Guardian.

The fishermen aren't the only people whose livelihoods are at risk:
British pension funds invest heavily in BP and rely on its dividend to generate income. ·