Business

US oil spill: BP shares plunge as board talks dividends

BP has seen its shares fall by 9% - as its directors discussed whether to suspend dividends to shareholders.

The firm is under intense pressure from the US government, which wants BP to use the money to pay for the Gulf of Mexico clean-up.

The cost of cleaning up the spillage has risen to $1.6bn (£1.1bn).

Meanwhile, US lawmakers have accused BP of cutting costs and taking short cuts in the run-up to the explosion that led to the oil spill in the Gulf.

The Democratic leaders of the US House Energy and Commerce Committee, Henry Waxman and Bart Stupak, wrote in a letter to BP boss Tony Hayward that the oil giant took shortcuts that "increased the danger of a catastrophic well failure".

Mr Hayward is due to appear before the committee on Thursday.

BP is also facing a raft of lawsuits, some of which have already been filed. The latest announcement on costs does not include any estimate of potential legal bills.

The company's value has almost halved since the Deepwater Horizon rig exploded on 20 April and sank off the coast of Louisiana, killing 11 workers.

Speaking to the House of Commons, Energy Secretary Chris Huhne said that BP "remains a strong company with exceptionally strong cashflow and has the resources to put the right the damage."

'Nickel and diming'

The BP board will discuss the dividend during a teleconference. No decision is expected to be announced immediately.

BP bosses are due to meet President Barack Obama on Wednesday. Mr Obama wants BP to pay money into a ring-fenced fund to compensate those with "legitimate" damages claims.

The company said on Monday that its response to the incident has so far cost $1.6bn.

Much of that is linked to the clean-up operation - but it said it had also paid 26,500 claims totalling $62m.

Last week, President Obama accused the oil firm of "nickel and diming" Gulf residents while planning big dividends for investors.

BP's meeting comes as the president begins a two-day visit to the Gulf Coast to view the damage from the slick.

'Real issue'

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BBC business editor Robert Peston has said it is looking increasingly likely that BP will stop paying dividends to shareholders - worth about £1.8bn per quarter - until it can quantify the final bill for the Gulf of Mexico spill and can "prove to the White House that it can afford those enormous costs".

The National Association of Pension Funds (NAPF) estimates that UK pension funds' exposure to BP was only about 1.5% of their total assets, which are worth more than £800bn.

But it said that the continued withholding of dividends would be a "real issue".

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