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BP shares boosted as dividend raise softens weak trading blow

BP paid out another US$2.4bn in Gulf of Mexico oil spill payments in 2019, but it expects the figure for 2020 will be beneath US$1bn

BP PLC - BP confirms weaker trading ahead of CEO switch, on-track to meet US$10bn divestment target

BP PLC (LON:BP. shares moved higher on Tuesday as the market welcomed a boosted dividend as a parting gift from outgoing chief executive Bob Dudley.

In afternoon trade, the FTSE 100-listed firm's shares were 4% higher at 470.90p.

The dividend hike softened the blow from an otherwise expected weaker trading performance, with the oil major confirmed a slowdown in profitability in 2019.

Underlying replacement cost profit – BP’s preferred metric to show its profitability – amounted to US$2.9bn for the fourth quarter, taking the figure for the whole of 2019 to around US$10bn. As anticipated this reflected a substantial reduction when compared to the respective US$3.5bn and US$12.7bn figures for 2018.

BP’s statutory profit measure was stated at US$19mln for the fourth quarter, which took the full year to US$4bn.

Outgoing chief executive Bob Dudley, in a statement, said: “After almost ten years, this is now my last quarter as CEO. In that time, we have achieved a huge amount together and I am proud to be handing over a safer and stronger BP to Bernard (Looney) and his team.

“I am confident that under their leadership, BP will continue to successfully navigate the rapidly-changing energy landscape."

READ: BP names new CFO as executive management switch approaches

The oil major reported US$1.9bn of impairments, mainly related to disposed of US gas assets, and separately it took a US$0.9bn charge tied to the reclassification of past foreign exchange losses amid the formulation of a new biofuels venture.

Gulf of Mexico oil spill disaster payments tallied some US$2.4bn for 2019, but, are expected to be below US$1bn in 2020. Excluding the oil spill payments, BP said operating cash flow amounted to US$28.2bn.

It said that capital spending for 2019 ended up in the bottom portion of its guided range.

More disposals to come

Divestments since the start of 2019 totalled US$9.4bn. The company said it remains ahead of schedule to meet its target for US$10bn of divestment proceeds by the end of 2020. The company also expects another US$5bn of disposals by mid-2021.

Net debt decreased by US$1.1bn in the fourth quarter and the company said gearing stands at 31.1% down from 31.7%.

It will pay a 10.5 cents per share dividend for the fourth quarter, which is 2.4% more than it paid in Q4 2018.

BP's chief financial officer Brian Gilvary, who is also set to depart, commented: “We continue to make strong progress on our divestment programme … Net debt fell $1 billion in the fourth quarter, and with further disposal proceeds expected, and assuming recent average oil prices, we continue to expect gearing to move towards the middle of the 20 to 30% range through this year.

“Together with the continued strong operational momentum, growing free cash flow, and our confidence in delivery of 2021 free cash flow targets, this underpins our announcement today of an increase in the dividend to 10.5 cents per ordinary share," the CFO added.

Well-oiled machine

Russ Mould, investment director at AJ Bell pointed out: “Fourth-quarter profit was down sharply but this was to be expected given the recent pressure on oil prices. And, not for the first time in recent years, the company still outmatched expectations while also hiking the dividend.

“This is testament to the streamlined and well-oiled machine which Dudley has successfully turned the company into.”

He added: “The sell-off in oil, linked to the impact of China’s coronavirus, has somewhat spoiled Dudley’s card although he still delivered a respectable 60%-plus total return for investors over his tenure despite a lot of background volatility.”

 -- Adds analyst comment, updates share price --

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Price: 438.25 GBX

LSE:BP.
Market: LSE
Market Cap: £88.76 billion
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