SCHUMER, WYDEN TO BP: SUSPEND SHAREHOLDER DIVIDEND UNTIL CLEAN-UP COSTS FROM GULF SPILL ARE CALCULATED
London-Based Reports Today Indicate BP CEO Plans To Reassure Investors This Week That Company Still Plans To Pay Out Dividend In Full; Senators Call Plan ‘Unfathomable’ Senators: BP Does Not Yet Know Final Tab For Costs From Gulf Disaster, Should Wait To Make Sure It Has Resources To Cover Clean-Up Before Transferring Assets Credit Suisse Analysis Pegs BP’s Potential Liability At $37 Billion—Far Above Company’s Internal Estimate of $4B
WASHINGTON, DC—U.S. Senators Charles E. Schumer (D-NY) and Ron Wyden (D-OR) pressed the head of British Petroleum (BP) on Wednesday to table plans to pay out its shareholder dividend until the full costs for cleaning up the Gulf oil spill can be calculated. According to London-based reports, BP CEO Tony Hayward plans to reassure shareholders that the company would go ahead with its dividend payment even as estimates of the company’s potential liability from the environmental disaster continue to rise.
“We find it unfathomable that BP would pay out a dividend to shareholders before the total cost of BP’s oil spill clean-up is estimated,” the senators wrote in a letter to Hayward.
“While we understand the need to reassure shareholders that the disaster in the Gulf will not substantially impact BP’s long term financial health, we are concerned that such action to move money off of the company’s books and into investors pockets will make it much more difficult to repay the U.S. government and American communities that are working around the clock to stem the damage caused by this devastating oil spill,” the senators added.
According to reports, BP has already spent $1 billion on efforts to stop the oil leak in the Gulf of Mexico, and it estimates its total costs from the incident to run at around $4 billion this year. But independent estimates of the potential clean-up costs far exceed that $4 billion figure. Credit Suisse analysts, for instance, have said BP’s costs could rise to $37 billion. Since the Obama administration has insisted that BP absorb the full cost of the clean-up, and BP has agreed to do so, Schumer and Wyden said the company should maintain high capital reserves to ensure it has the resources to deal with this worst-case scenario. Until a final estimate can be made of the costs that BP would need to bear, the senators said the company’s dividend should be suspended.
Last month, Transocean Ltd., the owner of the Deepwater Horizon rig involved in the spill, sparked a major controversy when it announced it would still be distributing $1 billion to shareholders. Wyden, joined by Schumer and 16 other senators, responded by writing a letter to Attorney General Eric Holder urging the Justice Department to investigate the company’s transfer of funds at a time when it could be on the hook for major claims. Since BP’s potential liability could dwarf Transocean’s, the senators said today that any decision by BP to go forward with its dividend would be even more troubling.
A copy of Schumer and Wyden’s letter to Hayward appears below.
Dr. Tony Hayward
Group Chief Executive
British Petroleum Plc
1 St James's Square
London, SW1Y 4PD
Dear Mr. Hayward,
We write to you out of concern that you will be announcing a dividend to your shareholders prior to fully covering the cost of the cleanup for the oil spill in the Gulf of Mexico. Today, several media outlets are reporting that you are expected to hold a conference call this week pledging to maintain BP’s dividend.
We find it unfathomable that BP would pay out a dividend to shareholders before the total cost of BP’s oil spill clean-up is estimated. The total cost of the clean-up estimates could reach $37 billion if the well leaks until relief drilling is completed in August, according to Credit Suisse Group AG. While we understand the need to reassure shareholders that the disaster in the Gulf will not substantially impact BP’s long term financial health, we are concerned that such action to move money off of the company’s books and into investors pockets will make it much more difficult to repay the U.S. government and American communities that are working around the clock to stem the damage caused by this devastating oil spill.
We urge you to reconsider your dividend pledge until accurate costs of clean-up and liability claims can be estimated. We are certainly not opposed to BP paying dividends after the well is capped, clean-up has been completed, and the victims have been justly compensated. But the families of those who have perished in this disaster, the industries that have been devastated from the ecological damage along the coasts, and the individuals who are sacrificing their health and safety to stem the damage deserve to know that BP will fulfill its obligations to them before its shareholders.
U.S. Senator Charles E. Schumer
U.S. Senator Ron Wyden