BP profits dive but that vital dividend stays

BP’S profits have slumped as it battles low oil prices, higher spending and a mounting bill from the Deepwater Horizon disaster.

The company posted net profit for 2016 of £2.28bn – less than half the £4.7bn it made in 2015, and its lowest level in a decade.

Meanwhile, earnings of £323m over the latest quarter were £129m worse than analysts had predicted.

Bosses also warned yesterday they needed the price of oil to rise to around $60 per barrel in order to hit their growth plans.

But the oil giant pledged to keep its vital dividend the same at 10 US cents per share, a yield of nearly 7pc. Overall this led experts to say that the firm was in a healthier position than many of its rivals.

BP chief executive Bob Dudley – whose £14m pay last year sparked a shareholder revolt – stressed the company had cut costs and started projects, putting it in a good position for the year ahead. The projects include investing £800m in offshore gas fields in Mauritania and £1.9bn in a 10pc stake in Egypt’s giant Zohr gas field.

It has also started drilling in the Gulf of Mexico, where the 2010 oil spill has cost the firm about £50bn.

Dudley, 61, added: ‘From increasing gas interests and renewing longterm low-cost oil to expanding our retail operations, these investments will generate significant long-term value for our shareholders. We start this year with considerable momentum – and a sense of disciplined ambition. We have laid the foundations for BP to be back to growth.’

Costs facing the company last year included a further £3bn in charges connected to the Deepwater Horizon clean-up – the disaster in 2010 that saw 11 die when a BP-chartered rig exploded. Experts at investment firm Hargreaves Lansdown said BP had done a good job selling assets and buying others with long-term potential, but they would require increased investment in the near term. As much as one-third of the company’s dividends were being paid in shares, they added, creating a sizeable dividend burden alongside the debt.

‘Neither is a viable long-term solution, and with the shares currently offering a prospective yield of 6.6pc the market is obviously nervous,’ they added.

Dudley told investors he was confident about the results of a deal struck in November by the oil-producing cartel Opec to cut production and raise the price of a barrel of oil. Yesterday Brent was at $54.93, but the company needs it to be $60 to cover costs.

BP’s results in the latest quarter were dented by lower than predicted earnings from its stake in Russia’s Rosneft. Refining and distributing fared far worse than exploration and production.

Meanwhile, rival Shell’s profits slid 8pc and Exxon Mobil’s earnings per share were 40pc lower than expected. The price of oil has halved since it was well over $100 per barrel in 2012-2014.

Russ Mould, investment director at AJ Bell, said of BP’s results: ‘Expectations were fairly low and it is fair to say they have lived down to those expectations.’

Shares were down 4pc, or 19.45p, to 457.1p.