EnergyOil & Gas

BP up as profits double again in 2018 but that won’t be reflected in shareholders’ payouts

Shareholders who take their dividends in sterling will see their annual payment fall, despite a surge in profits last year

gulf of mexico oil spill
BP is still paying more than US$3bn a year in costs related to the 2010 Gulf of Mexico oil spill

Underlying profits at BP PLC (LON:BP.) more than doubled in 2018 but the oil supermajor’s UK shareholders won’t see that reflected in their latest dividend payouts.

Higher oil prices and favourable exchange rate movements saw the FTSE 100 group turn an underlying replacement cost profit of US$12.7bn in 2018, up from US$6.2bn a year earlier.

READ: Why easy paydays are over for BP and Shell

It is the second year in a row that BP has doubled its profits as it continues its recovery from a wretched 2016 when it racked up losses of US$6.5bn.

But despite the surge in profitability, BP – which brought six new projects onstream last year, including the Clair Ridge project, west of Shetland – only upped its annual dividend by 1.3% to 40.5 US cents a share (2017: 40.0 US cents).

It was even worse for those shareholders who take their payment in sterling: reflecting a stronger pound, their annual dividend actually dropped to 30.57p a share from 30.98p in 2017.

Operating cash flow growth

Away from investor pay-outs, BP, much like its peer Royal Dutch Shell PLC (LON:RDSB) last week, reported strong operating cash flow growth in 2018.

Excluding payments related to the Gulf of Mexico oil spill, which cost it US$3.2bn last year, despite happening nine years ago, operating cash flow totalled US$26.1bn, compared with US$24.1bn in 2017.

Underpinning the solid performance was record reliability at its plants, while throughput at its refineries reached all-time highs. In total, BP averaged production of 3.7mln barrels of oil equivalent per day (boepd) in 2018.

Boss says strategy is 'clearly working'

“We now have a powerful track record of safe and reliable performance, efficient execution and capital discipline,” said chief executive Bob Dudley, who took home US$13.4mln in 2017.

“And we're doing this while growing the business - bringing more high-quality projects online, expanding marketing in the Downstream and doing transformative deals such as BHP.”

He added: “Our strategy is clearly working and will serve the company and our shareholders well through the energy transition.”

In early afternoon trading, BP shares were 4.8% higher at 545.10p, topping the FTSE 100 leader board.

Helal Miah, investment research analyst at The Share Centre commented: “Overall, this is an excellent set of results and we would expect the group to make further progress should oil prices hold.

“For investors BP is an attractive proposition with a healthier outlook and good dividends. We maintain our ‘Buy’ recommendation for investors seeking a balanced return willing to accept a medium level of risk.”

 -- Adds analyst comment, share price --

Quick facts: BP PLC

Price: £4.90

Market: LSE
Market Cap: £99.93 billion


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