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London - BP raised its quarterly dividend for the second time in six months yesterday and said more share buybacks were on the cards, showing how the British oil firm’s asset sales are providing more cash for investors.
Shareholders have urged big oil companies such as BP and Shell to control spending and give back more cash because of concerns over rising costs in the oil and gas industry and their impact on profitability.
“As well as progressive growth in the dividend per share, we expect to use surplus cash to support further distributions through share buybacks or other mechanisms,” chief executive Bob Dudley said.
BP reported a 24 percent drop in first-quarter underlying replacement cost profit to $3.2 billion (R34bn), slightly ahead of a consensus forecast of $3.1bn.
The profit fall reflected weaker refining margins and lower production as the company has shed assets to raise funds for shareholder payouts.
It wrote off $521 million related to its decision not to proceed with a shale project in the Utica basin in the US.
Profits were also hit by a drop in the contribution from BP’s stake in Russian oil company Rosneft.
BP, the largest foreign investor in Russia through its almost 20 percent stake in the Kremlin’s state oil champion, has said repeatedly that it would stand by its investments in Russia since Moscow’s intervention in Ukraine. BP said this week it was considering what US sanctions against Rosneft head Igor Sechin would mean for its business.
The share of profits BP generated from Rosneft shrank 75 percent in the quarter for two reasons: the weakening rouble as Russia’s economy comes under pressure from the stand-off with the West over Ukraine, plus the absence of a tax charge boost in the previous period.
Russian production made up about a third of BP’s output in the first quarter. Cash flow came in at $8.2bn, more than double the amount a year ago.
BP, Europe’s third-biggest oil company by market capitalisation, will raise its quarterly dividend to 9.75c a share, to be paid in June, 8.3 percent higher than a year earlier. This is also above the 9.5c announced in October and paid for the subsequent two quarters.
The groups’s dividends are returning to near levels last seen in 2009 before the Gulf of Mexico oil spill in 2010, after which dividends were suspended for three quarters.
Before the Gulf spill, BP had paid a dividend of 14c.
The higher payouts will be partially funded by asset sales. It has said that by the end of next year it would sell $10bn worth of assets, in addition to the $40bn worth of disposals made to help pay for the 2010 Gulf of Mexico oil spill.
“Overall I think it’s a solid set of results, which holds out the hope that BP can sustain increased distributions going forward,” Liberum analyst Andrew Whittock said. He was cautious over Russia but said it was unclear at present how sanctions might affect BP.
BP shares were up 0.8 percent to £4.93 by 9.36am in London. – Sarah Young and Karolin Schaps for Reuters