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LONDON. — Europe’s third-largest oil company raised its dividend after third-quarter earnings fell less than expected.
Profit adjusted for one-time items and inventory changes dropped to US$3,7 billion from US$5 billion a year earlier, the London-based company said in a statement.
That beat the US$3,4 billion average estimate of 13 analysts surveyed by Bloomberg. It increased the dividend by 5,6 percent to 9,5 cents a share.
Chief executive officer Bob Dudley is trying to return BP to growth after divesting more than US$60 billion 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 strong operational progress we are now seeing across the group, combined with our focus on disciplined investment, underpins our confidence in growing long-term sustainable free cash flow and being able to increase shareholder distributions,” Dudley said in the statement.
The company will sell a further US$10 billion of assets by the end of 2015 and give most of the proceeds to shareholders, favouring buybacks, it said yesterday.
BP is already about halfway through an US$8 billion buyback programme, funded by a deal in which it sold its half of Russian venture TNK-BP and took a 20 percent stake in OAO Rosneft, the country’s biggest oil producer. BP jumped as much as 4 percent in London trading, the biggest intra-day gain since April and was up 3,7 percent at 469 pence by yesterday morning.
The company, which competes in Europe with Royal Dutch Shell Plc and was overtaken by Total SA (FP) in market value this year, said in February that underlying oil and gas production should increase this year after holding steady in 2012. Reported output will drop as disposals shave off 150 000 barrels a day.
Production was 3,17 million barrels of oil equivalent a day in the third quarter. Excluding Russia, output was 2,3 percent lower than a year earlier at 2,2 million barrels a day following asset sales. Adjusting for disposals, volumes rose 3,4 percent on higher output from fields in the North Sea and Angola.
Brent crude prices averaged US$109,65 a barrel in the period, just 23 cents higher than a year earlier, while BP’s refining marker margin, a generic measure of profitability, dropped to US$13,62 a barrel from US$23,15. Profit from BP’s refining arm plunged to US$1 billion from US$3,4 billion.
Capital expenditure this year will be US$24 billion to US$25 billion and will hold below US$27 billion through 2020, BP said. The ratio of net debt to net debt plus equity was 13,3 percent at the end of the third quarter, while the effective tax rate was 31 percent.
“The dividend increase, the US$10 billion divestiture target with proceeds going to share repurchases and flat 2014 capital expenditure are all very shareholder-friendly,” said Jason Gammel, an analyst at Macquarie Capital Europe Ltd in London.
While Dudley is trying to keep a lid on spending, the company is increasing investment in exploration. It will complete as many as 18 exploration wells this year and bought stakes in blocks off Morocco this month. — Bloomberg.
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