European shares led lower by BP and UBS

* FTSEurofirst 300 index falls 1.7 percent

* BP slumps after worst loss in 20 years

* UBS (NYSEArca: FBGX - news) down on surprise outflow of funds (Updates prices)

By Atul Prakash

LONDON, Feb 2 (Reuters) - European equities fell sharply on Tuesday as crude oil prices slipped again on oversupply concerns and companies such as oil major BP disappointed on the earnings front.

Swiss bank UBS also slumped, down 7.8 percent, after reporting a surprise outflow of funds from its flagship wealth management business, overshadowing its best annual results since 2010 and a higher than expected dividend payout.

BP fell 7.9 percent after reporting its worst annual loss in more than 20 years in 2015. It (Other OTC: ITGL - news) announced thousands more job cuts following a deep rout in oil prices and maintained its dividend, but the weak results and outlook are bound to pile pressure on the company, which has had to increase borrowing.

"BP hasn't blinked on its dividend, but it is playing chicken with the oil price. BP's dividend is a mile away from being covered by earnings and the market is saying that this is unsustainable," said Steve Clayton, head of equities research at Hargreaves Lansdown (LSE: HL.L - news) .

"They are a chasm away from their cash break-even oil price of around $60 dollars per barrel," he said.

The STOXX Europe 600 Oil and Gas index dropped 3.9 percent after crude oil prices fell again on worries about top energy consumer China and rising oil supply.

Shares (Berlin: DI6.BE - news) in Reposol, Royal Dutch Shell (Xetra: R6C1.DE - news) , Eni (Swiss: ENI.SW - news) and Total (Swiss: FP.SW - news) all fell between 3 and 5 percent.

The pan-European FTSEurofirst index ( .FTEU3) dropped 1.7 percent by 1104 GMT, after closing 0.2 percent weaker in the previous session. The index is down more than 7 percent so far this year.

BHP Billiton (NYSE: BBL - news) fell 6.6 percent after Standard & Poor's cut the world's largest miner's credit rating and warned it might be lowered further if measures to shore up cash levels were not taken, cementing expectations BHP will slash its dividend for the first time in 15 years.

However, some companies advanced on the back of encouraging results and positive company news.

Shares in Danske Bank (Copenhagen: DANSKE.CO - news) rose 2.7 percent after reporting a forecast-beating pretax profit in the fourth quarter, thanks to higher trading income. The bank also plans to launch a share buy-back programme.

Sainsbury (Amsterdam: SJ6.AS - news) 's rose 2 percent after Britain's second biggest supermarket agreed to buy Argos-owner Home Retail (Other OTC: HMRLF - news) for 1.3 billion pounds to boost its online business and expand sales of items such as electrical goods.

Sainsbury's said it expected the offer to boost its earnings per share in the first full year following completion.

Today's European research round-up (Additional reporting by Danilo Masoni in Milan; Editing by Tom Heneghan)