BP oil-spill pay­ments con­cern its in­vestors

The Star Early Edition - - BUSINESS REPORT INTERNATIONAL - Rak­teem Katakey

MULTI­NA­TIONAL oil and gas com­pany BP has moved to calm in­vestor con­cerns after debt rose to a record, say­ing lower oil-spill pay­ments for the rest of the year and funds from as­set sales will ease the bur­den.

“This year debt is go­ing up ex­actly in line with pay­ments go­ing out for Ma­condo,” chief fi­nan­cial of­fi­cer Brian Gil­vary said yes­ter­day. “And it will come back down com­men­su­rately in the sec­ond half of the year when dis­posal pro­ceeds come in.”

Net bor­row­ings to­talled $39.8 bil­lion (R521.61bn) at the end of June, up al­most $9bn in a year, be­cause of con­tin­u­ing pay­ments for the 2010 Gulf of Mex­ico spill.

While BP man­aged to cover its div­i­dend and spend­ing com­mit­ments with cash flow in the first half, it will need oil prices to rise or at least stay put to avoid fur­ther debt in­creases over the re­main­der of the year. “The thing which is al­le­vi­at­ing any con­cerns is the fact that we’re now cash break-even at be­low $50 a bar­rel,” Gil­vary said.

Sev­eral of Europe’s big­gest oil com­pa­nies have sig­nalled a re­turn to growth with earn­ings that ex­ceeded an­a­lyst ex­pec­ta­tions. Royal Dutch Shell gen­er­ated al­most as much cash from op­er­a­tions in the sec­ond quar­ter as it did when crude was above $100. Still, many pro­duc­ers are re­ly­ing on dis­pos­als and scrip div­i­dends – pay­outs in stock – to free up funds.

At BP, the Ma­condo dis­as­ter forced chief ex­ec­u­tive Bob Dud­ley to sell bil­lions of dol­lars of as­sets to fund fines and com­pen­sa­tion.

Re­duced de­cline

The stock rose 2.5 per­cent to 456.9 pence (R78.74) at 8.22am in Lon­don yes­ter­day, re­duc­ing its de­cline this year to 10 per­cent. Bench­mark Brent crude traded at $52.84 a bar­rel.

While gear­ing, or net debt to cap­i­tal, climbed to 28.8 per­cent in the sec­ond quar­ter from 24.7 per­cent a year ear­lier, BP gen­er­ated $4.9bn in cash from op­er­a­tions, not far off the lev­els of 2012 and 2013.

“Cash flow was strong in the first half – or­ganic cash flow ex­ceeded or­ganic cap­i­tal ex­pen­di­ture and div­i­dends paid,” Gil­vary said. – Bloomberg

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