BP: Boosts Profit
IN EARLY April 2010, shares were 623p. That was before the Deepwater Horizon disaster, the worst offshore oil spill in history.
The catastrophe claimed 11 lives, affected livelihoods and sent BP shares tumbling to 319p.
The company continues to pay compensation claims for Deepwater, but today, eight years on, there is renewed confidence within the business. The shares are 553p and should continue to rise.
Chief executive Bob Dudley raised the dividend last week, which is calculated in cents as oil prices are quoted in dollars. Last week’s rise was the first in the US currency since 2014 but UK shareholders have enjoyed a steady increase in payments, due to the exchange rate.
BP has profited from the more than doubling of the oil price over the past two and a half years – from $29 to $72 a barrel. But the group is also reaping the benefits of a raft of internal changes. Management is different, as is the culture, and more than $50 billion (£40 billion) of assets have been sold, with a focus on rigorous financial and operational discipline since Deepwater.
Some analysts are worried that Dudley’s strategy is changing, as he announced a $10billion deal just ten days ago, buying a massive portfolio of US shale oil and gas fields. The acquisition is BP’s largest since 1999, but the company insists this is not the precursor to a string of expensive deals and says that the transaction will swiftly boost sales and earnings.
Results for the three months to June 30, released on Tuesday, beat expectations. Profit quadrupled to $2.8billion, production rose and new projects came on stream, with more planned for the near future.
Analysts expect a full-year dividend of 30.7p, putting the stock on a yield of 5.5 per cent. Midas verdict: Bullish investors point to the rising dividend, BP’s financial strength and its investment in future projects, including renewable energy ventures. Bears worry about the outlook for oil, and BP’s near 20 per cent stake in Russian energy giant Rosneft. For longterm investors in search of income, the bulls’ case is more compelling. At 560½p these shares should rise and deliver increasing dividends.