This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
TheStreet Open House

Why BP Made Concessions

(BP dividend suspension story updated for reports of BP plan to sell debt)

NEW YORK (TheStreet) -- BP (BP) chairman Carl-Henric Svanberg announced from outside the White House that the British oil giant will suspend its dividend at least through the third quarter of 2010, but the task fell to CFO Byron Grote to sell the dividend plan and other major financial concessions to investors on a Wednesday afternoon conference call.

Grote tried to spin all the concessions made by BP as the "prudent" move to increase confidence in the embattled company, which has seen its market value cut in half and its bond ratings knocked down to two notches above junk status, with bond and swaps yields also widening.

British Petroleum Chairman Carl-Henric Svanberg
BP Chairman Carl-Henric Svanberg

BP's dividend suspension will remain in place for the second and third quarters -- in effect, the remainder of 2010. Grote said the board will review the dividend policy again when it reports fourth-quarter earnings at the beginning of 2011. By then, it hopes to have a clearer picture of all the costs and liabilities resulting from the oil spill.

About the BP dividend, Grote said, "the board takes these steps having had deep consideration of all factors and having thought long and hard about it. ... Given the timing of costs and liability associated with the spill, even though business continues to operate well, with strong cash flows, we need to take a deeply conservative fiscal approach to running our business at this time and in that framework we made these decisions today."

Facing questions as to what happened to the reported plans to create a dividend IOU plan, Grote reiterated the prudency of its decisions and said, "We recognize the dislocation this makes for some of our long-term shareholders but the board is looking at what is right over the long-term," and remains committed to dividend payments.

The essential question to the BP CFO on the call could be boiled down to this: if executives had a constructive discussion with the White House, as BP's chairman said, why does it seem that all the concessions were made by BP?

The response from Grote was, over and over again, all the actions taken by BP on Wednesday relate to two primary factors. First, the company has always said it will make good on all legitimate claims resulting from the oil spill and the agreement with the White House provides a framework for this position.

Second, taking an extremely conservative fiscal approach is the oil giant's way of trying to put an end to the market fears and rhetoric that BP is not a viable company given the uncertainty resulting from the spill. Grote noted the comment made by President Obama in his White House briefing, when the President said BP is a strong and viable company and it remains in everyone's best interest that BP remain that way.

1 of 4

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
DOW 17,067.56 -30.89 -0.18%
S&P 500 2,002.28 -1.09 -0.05%
NASDAQ 4,598.1880 +17.9170 0.39%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs