Update: Another Billion Of BP's Money Bites The Dust. Dividend Cut Next?

| About: BP p.l.c. (BP)
This article is now exclusive for PRO subscribers.


BP will take up to $1 billion in charges over the next year regarding its layoffs.

This continues to give me confidence in my bearish stance on BP.

I anticipated this and much more coming in the way of under-expensed billion-dollar charges.

In sort of an update to an update, BP (NYSE:BP) says it will take $1 billion in charges over the next five quarters, presumably including the current quarter due to its recently announced layoffs. It's also considering cutting another $1 to $2 billion in investments for which it blames the recent oil slump suggesting it feels the slump is more than a temporary blip. Thousands of BP's 84,000 employees are expected to lose their jobs.

Personally I find the timing interesting in wake of the audit of its business economic claims settlement for the April 2010 oil spill. Since then the Supreme Court basically told BP to talk to the head and refused to even consider the case in a unanimous ruling. This sets the stage for all current and future claims to go through the regular review process and allow billions of dollars in new charges and payouts for which BP has been trying to halt and hasn't accounted for a single go-forward dime of.

As I've stated in other articles, the billions in payouts may not itself hurt BP too severely, but it's the business economic claims payout plus all of the other payouts and charges that keep piling up that is a problem and could lead to BP cutting or even halting its dividend. Today's revelation of another $1 billion getting shed is just another heavy straw on BP's back. One thing for sure - I wouldn't count on a dividend raise any time soon. Imagine how bad that would look for a company already with enough publicity problems to be talking about laying off thousands of people just ahead of Christmas and then raising the dividend. It's not going to happen, but a cut in the dividend would be far more likely.

Disclosure: The author has no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it (other than from Seeking Alpha). The author has no business relationship with any company whose stock is mentioned in this article.