BP shares rebound after near-record fall

LONDON — Shares in BP PLC rose in London and New York today despite suggestions by its chief executive that the second quarter dividend may be suspended to calm political criticism in the U.S.

BP shares were up 8 percent at 394.95 pence ($5.78) at noon on the London Stock Exchange after touching a 13-year low yesterday.

In New York yesterday, the stock closed 12.3 percent higher, clawing back most of the losses from a 15.8 percent rout on Wednesday. In pre-market trading today, BP shares rose to $34.59 from $32.78 at yesterday’s close.

The shares have fallen from 655.4 pence before the April 20 explosion on the Deepwater Horizon rig that killed 11 people.

The company has come under heavy pressure from President Barack Obama and his administration to suspend its dividend, a possibility that initially soured investor sentiment but some think is now priced into the share value.

“We are considering all options on the dividend. But no decision has been made,” BP’s chief executive Tony Hayward said in an interview reported in today’s Wall Street Journal.

While suspension of the dividend would be a disappointment to investors, it could also deflect some of the intense political heat that BP is feeling in the United States.

Thursday’s share turmoil came after U.S. Interior Secretary Ken Salazar said he would ask BP to compensate energy companies for losses if they have to lay off workers or suffer economically because of a six-month moratorium on deep-water drilling imposed by the Obama administration following the rupture at BP’s well.

The chief executive of Britain’s National Association of Pension Funds said today that investors might be receptive to a suspension of dividends to protect the company’s long-term future. Joanne Segars told the BBC that BP’s “long-term” future was far more important.

“BP’s current difficulties shouldn’t have an immediate or serious impact on those saving into a pension scheme or on those who have retired,” said Segars, the association’s leader.

James Bevan, chief investment officer at CCLA, which manages investments for charities, local government and faith organizations, said BP could afford to suspend dividends.

“BP has always said that its dividend policy will take account of the strength of its balance sheet — BP’s balance sheet is very strong — but also the long-term growth prospects for the company,” Bevan said in a BBC radio interview.

“And deferring one or even two dividends would not be inconsistent with taking a long view that ultimately could repay shareholders handsomely.”

Some analysts are already predicting a cut in the dividend. Evolution Securities said yesterday that it expected the current year payout to be 28 cents a share, half of the previous year’s level, but they continued to recommend the shares as a “buy.”

“We fully agree with our fundamental analysts’ view that BP can afford to pay the dividend and that they should pay the dividend,” said Evolution Securities said in a research note. “However, there is mounting political pressure focused on the issue of the BP dividend and in light of this we believe it is prudent for income-dependent investors to plan for a cut/suspension going forward.”

The White House on Thursday released a letter inviting BP chairman Carl-Henric Svanberg and “any appropriate officials from BP” to meet Wednesday with senior administration officials.

Coast Guard Adm. Thad Allen, who leads the U.S. government response to the crisis, said Obama would participate in a portion of the meeting.

Obama has yet to meet with any BP official since the explosion.

“The bottom line in this crisis is that BP will not only finish the job of clean up and repair, will pay all the damage and take the subsequent consequences for the event on its shoulders, cut or even halt dividend payment for one year should the board deem this necessary and at the same time, survive to tell the tale,” said Howard Wheeldon, senior strategist at BGC Partners in London.

“BP does not need to be told by anyone how to run its business not by the president of the U.S. or by press and media.”

White House Press Secretary Robert Gibbs earlier in the day did not rule out the possibility of a meeting next week between Obama and BP chief executive Tony Hayward. Hayward is scheduled to testify next Thursday at a House Energy subcommittee hearing into the spill.

Meanwhile, BP announced a grant of $25 million to the state of Florida to support the state’s contingency plan to deal with a leak from a BP well. BP said late yesterday that it had previously given the state $25 million for contingency planning and the same amount to help the tourist industry.

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