London - BP's share price soared almost 10% on Thursday even as the group suspended its shareholder dividend and agreed to create a $20bn fund for costs from the Gulf of Mexico oil spill.
After leaping in early trading, the stock later fell back slightly to 361.17 pence, up 7.17% from Wednesday's closing level, as investors welcomed news of firm commitments following weeks of uncertainty.
BP's board met with US President Barack Obama on Wednesday and agreed to freeze payments to shareholders and sell assets and unveiled plans to set aside a huge claims fund worth the equivalent of
€16.2bn.
Investors welcomed the removal of uncertainty which has dogged BP ever since the Deepwater Horizon oil rig sank on April 22, sparking an enormous oil leak.
"The bounce in BP is because some uncertainty has been removed," said David Morrison, analyst at financial spread-betting group GFT.
"We now know that $20bn is being placed in escrow, that $7.8bn in dividend payments are being cancelled, that $10bn in assets will be sold and capital expenditure will be reduced by $4.0bn."
He added: "Most importantly, this is seen as mollifying the US administration."
BP has faced intense political pressure from Washington over the spill, which is now the worst man-made environmental disaster in US history.
Crisis far from over
BP chief executive Tony Hayward meanwhile faces a flaying from furious US lawmakers later on Thursday over the spill, a day after the energy giant pledged at least $20bn for compensation claims.
Hayward faces fuming US lawmakers, some of whom have publicly suggested senior BP officials should "commit hara-kiri", after he and BP chairperson Carl-Henric Svanberg were summoned to the White House on Wednesday.
In addition to the $20bn compensation fund, the British firm announced it would halt shareholder dividends this year, and Svanberg pledged that spill-related claims would be handled "swiftly and fairly".
BP will also offload $10bn worth of assets this year, its chief financial officer Byron Grote said on Wednesday.
Detailing a "deeply conservative fiscal approach" in the face of still-unknown costs of cleaning up the spill, Grote said the firm would sell mainly "non-core" assets.
Jonathan Jackson, head of equities at broker Killik & Co, agreed that the latest development provided much-needed clarity on the embattled company.
"Overall, we believe this announcement is positive and provides some clarity for shareholders," said Jackson.
"Importantly, we would hope the agreement draws something of a line under the political tension that has developed between BP and the US government over recent weeks.
"The acknowledgment by the US administration that BP is a strong company and that it has no interest in undermining its financial stability is very helpful."
Morrison agreed, but warned that the crisis was far from over.
"The stock will remain vulnerable until BP manages to block the spill," he added.
- AFP