Trump’s gift to oil majors

WITH the price of Brent crude rising and Oxford Economics predicting it will be $100 a barrel before the end of 2019, BP’s unexciting first-quarter results may be just the canapes with the banquet to come.

The dent in profits of £1.9bn was largely down to lower refining income. But it is still better than forecast, if sharply down on the final quarter of last year.

The Deepwater Horizon disaster of nearly a decade ago has yet to wash itself out of the system with a charge of £502m in the first quarter. The bills are down sharply, from £5.4bn in 2016, to £2.5bn last year, and are expected to drop to £1.5bn this year. The nightmare which has cost investors £52bn won’t be fully expunged until 2023.

BP faces a new threat from the environmental activists who will doubtless be in evidence at the May 21 annual meeting in Aberdeen. It already has made it clear that it will support a resolution drawn up by Climate Action 100+ which seeks a better response to greenhouse gas emissions.

After a 60pc revolt against chief executive Bob Dudley’s package three years ago it is

hopeful of avoiding censure on May 21, in spite of a pay packet of £11.3m.

The bigger political issue for BP in 2019 could well be a further jump in oil prices. Donald Trump’s strengthened embargo in Iran has left deliveries to China on the high seas, intensified the slump in Iran and so far realised no increased production from Saudi Arabia. All of which will put upward pressure on prices and will be causing anger on the forecourts.

Faith in the upward movement in energy prices has been underlined by the Oracle of Omaha, Warren Buffett, who is backing Occidental Petroleum’s £42.2bn bid for Anadarko, with a £7.7bn investment in West Texas fracking.

All of this may be helpful for investors in the oil majors over the short-term, boosting profits and dividends.

But higher energy prices also are a drag on consumer spending and business, and could destabilise global output.

Inn keeper

LIFE ought to be much simpler now for Whitbread’s chief executive Alison Brittain. After selling Costa to Coca-Cola for £3.9bn, the hospitality group is swimming in cash. It has paid off the group’s pension deficit, cut debt and is to give £2bn more of the proceeds back to shareholders.

An advantage of a conglomerate model is that when one part of the enterprise is underperforming, another bit of the business fills the gap.

The new focus means that Whitbread is now more or less a pure play in the no-frills Premier Inn chain which, for the moment, is largely a domestic enterprise.

And while consumer confidence has held up well, business travellers, so important to Premier, are reacting to uncertainty about the UK’s economic prospects by cutting back on regional travel.

Brittain, sensibly, is pressing on with investment regardless. So even though pretax profits were sharply down in 2019 and cash flow reduced, confidence in the future is shown in the shape of increased capital expenditure of £557m. In the UK, room numbers climbed by 5.1pc to 76,171 in 2018, including the opening of a hub hotel in Edinburgh and an experimental Zip hotel in the Cardiff area.

Starting at £19-a-night, such accommodation – with rooms having their own en suite – is seen as a cheap and cheerful alternative to the bed and breakfast or boarding houses often used by temporary workers.

There is also a big focus on Premier becoming a major player in Germany where the idea of a national budget chain is novel. Openings have taken place in Frankfurt and Hamburg and there are 20 more planned by the end of 2020.

Brittain, rightly, is refusing to hold back.

Winter bites

GIVEN its exposure to fast growing Asian, Middle Eastern and African markets, Standard Chartered ought to be a growth stock but has long been a disappointment.

Recovery has not been made any easier by breaches of money laundering regulations.

Former JP Morgan banker Bill Winters looks to have steadied the ship with a 10pc rise in profits and a pledge of a £770m share buyback.

But wouldn’t the money be better spent on strengthening reserves, robust IT and compliance training?