BP could have to slash dividend payments both this year and in 2011, warns Hargreaves Lansdown.
This would have a major impact on UK pensions funds as just about every scheme holds shares in the oil giant, says Hargreaves head of pensions Tom McPhail.
Fears for the future of BP grew today as clean-up costs spiralled for its clean-up operation in the Gulf of Mexico.
Since the Deepwater Horizon drilling rig exploded on 20 April, the oil company has lost around £44bn of its value.
On the FTSE 100, BP shares were down 2.09% or 9p to 421.00p per share at around 1pm today, following a 15% dive yesterday.
But Hargreaves Lansdown head of pensions Tom McPhail says while the immediate capital loss is "unfortunate", the bigger long-term problem could be BP's inability to pay dividends.
"Just about every pension fund holds shares in the company and some funds have as much as 5% of their assets with BP."
With cash inflows of $27bn in 2009, McPhail says in principle BP can "comfortably" cover clean-up costs at current estimates of around £1bn.
"But we just don't know the final figure. Credit Suisse says clean-up and total liability costs could be up to $17bn (£11.6bn).
"In addition, there is the uncertainty around whether BP will in future be able to do business in North America, as there are very hawkish noises coming out of the US over this."
The knock-on effect of continued uncertainty is likely to have a negative impact on pension funds, says McPhail.
"There is the possibility BP might have to cut its dividend payment this year and next year."
US President Obama today said he would launch a criminal probe into the Gulf of Mexico disaster.
BP is still trying to stem the underwater flow of oil off the east coast of the US, although after several failed attempts it now may not be able to stop the leak until August. Around 800,000 gallons of oil a day are gushing from the undersea well.
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