BP Cutbacks Surprise Investors

The oil giant BP has announced that it plans a $20 billion fund to pay for claims arising from the oil spill disaster in the Gulf of Mexico.

As part of its measures to pay its penalty, BP has also cut dividends for the next three quarters. The dividend payout for the first quarter due for June 21 has been cancelled, as have those in the second and third quarters.

Investors were surprised by the scale of BP's cutbacks - it also plans to sell assets and trim its investment programmes. Most had predicted that the company would pay dividends in shares for a quarter or two. UK pension funds are affected by this, as many have heavy investments in BP.