Dow Jones Newswires | BP PLC (BP) said it won’t issue more
dividends this year and agreed to put $20 billion in an independently
administered oil-spill escrow fund to help pay for claims as a result of
the Gulf oil disaster.

BP announced the moves after Chairman Carl-Henric Svanberg, Chief
Executive Tony Hayward and other company executives met at the White
House with President Barack Obama, who said BP also will set aside $100
million for those workers who lost jobs due to the drilling moratorium.

In addition to not paying dividends this year, BP said it will sell off $10 billion in assets and reduce capital expenditures by at least $4 billion to build up the $20 billion fund in the next three and a half years.

The company also added it’s can generate $30 billion in cash flow from its global operations above and beyond the oil spill costs.

However, BP could face liabilities beyond the $20 billion. The company said it will not have clarity on its ultimate liabilities and penalties until the well is capped. BP  failed to secure a cap on liabilities in the negotiations.

The CEO will face a tough crowd on a House Energy and Commerce subcommittee Thursday. Among other things, Hayward will tell lawmakers that “I fully grasp the terrible reality.” Also, he will say that the exact cause of the spill remains unclear until ongoing investigations are completed.

The White House is expected to name pay czar Kenneth Feinberg the fund’s independent administrator.

Feinberg handled compensation claims for 9/11 victims. He oversees executive compensation at the country’s biggest financial firms.

A second BP containment system, the Q4000, has begun collecting oil with a goal of  20,000 to 28,000 barrels a day.

The company said it hopes to have two additional ships in place by the end of June to capture 40,000 to 53,000 barrels a day. 

BP’s stock price mostly rebounded from earlier lows in the U.S. but slid more in Europe. Its American depositary shares closed up 1.4 percent, to $31.85, after dropping more than 4 percent earlier. BP closed down 1.5 percent in London.

The yield on BP’s most-traded bond, a five-year note due in 2013, fell to 7.771 percent Wednesday from 8.353 percent Tuesday, according to data provider MarketAxess. Before news of the dividend and cleanup fund, the yield on that bond reached 9.865 percent.

BP’s five-year credit default swaps, or CDS, jumped as much as 26 percent Wednesday, to 625 basis points from 495 basis points Tuesday, according to data provider Markit. But after the company announced the fund and its dividend cut, the CDS fell to 545 basis points.