London - BP kicked off the quarterly results season for top global oil companies with some good news for the sector’s beleaguered investors yesterday: a forecast beating result, a dividend hike, and a promise to sell more assets and return the proceeds to company shareholders.
The fifth-largest oil and gas firm by value among investor-controlled groups also reassured investors that capital spending next year would stay steady at $24 billion (R236bn) to $25bn – a slight tightening from previous guidance of $24bn to $27bn for the years up to 2020.
Shareholders throughout the sector have been worried that rising costs will allow spending to balloon, crimping cash flow should oil prices drop and reducing the industry’s ability to offer them returns.
BP’s underlying replacement cost net profit for the quarter was $3.692bn compared with a company-supplied consensus forecast of $3.170bn.
The figure for the three months to September was sharply lower than $5.017bn a year ago, mainly because of weaker refining margins, divestment of refineries and reduced income from its Russian business, but it was more than the second quarter’s $2.712bn when a big Russian tax charge hit the bottom line.
The company also raised its quarterly dividend by 5.6 percent to 9.5c a share and said it would sell $10bn of assets over the next two years, returning most of the proceeds to shareholders – a higher rate of disposal than previously promised.
BP has already sold $38bn of assets to pay for the Deepwater Horizon oil spill in the Gulf of Mexico in 2010, but asset sales have become a theme across the sector as it struggles with rising costs and eyes potentially lower oil prices in future.
The company recently won a small victory in its sea of legal defeats over the oil spill and in the results it derecognised about $400 million of provisions within the $20bn fund it has set aside for certain types of compensation. However, it raised slightly its overall cumulative charge for the spill to $42.5bn from $42.4bn.
Chief executive Bob Dudley is trying to return BP to growth after divesting more than $60bn in assets in the wake of 2010’s Gulf of Mexico oil spill. While BP still faces billions of dollars in fines and settlement payouts, Dudley is bolstering dividends and buybacks to gain investor confidence as the shares languish about 30 percent below the pre-spill level.
“The underlying business is performing very well,” Dudley said. “Our shareholders have been very patient with BP and it’s time to reward them. Capital discipline is also very important.”
BP jumped as much as 5.4 percent in London trading, the biggest intraday gain in a year, and was up 4.4 percent at £4.72 (about R75) at midday yesterday. - Reuters and Bloomberg