ii view: BP CEO boosts dividend for the last time

A prodigious cash generator yielding over 6%. Investors chase the shares higher.

Fourth-quarter results to 31 December 2019

• Underlying replacement cost profit down 26% to $2.6 billion
• Underlying upstream production up 2.7%
• Net debt up 4.4% year-over-year to £45.4 billion
• Dividend payment up 2.4% to 10.5 cents per share

Guidance:

• Expect full-year 2020 underlying production to be lower than 2019
• Expect to announce a further $5 billion of agreed disposals by mid-2021

Chief executive Bob Dudley said:

"BP is performing well, with safe and reliable operations, continued strategic progress and strong cash delivery. This all supports our commitment to growing distributions to shareholders over the long term and the dividend rise we announced today. 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 and his team. I am confident that under their leadership, BP will continue to successfully navigate the rapidly-changing energy landscape."

ii round-up:

Oil giant BP (LSE:BP.) operates in over 75 countries across the world. 

Generating sales of just over $275 billion in 2019, it employs over 70,000 people and produces 3.78 million barrels of oil equivalent per day. Around 1.7 million barrels of oil pass through its refineries daily and it operates over 18,500 retail sites globally. 

For a round-up of these third-quarter results, please click here.

ii view:

BP continues to navigate a multitude of difficulties and opportunities. The disastrous 2010 Gulf of Mexico oil spillage has cost it billions, while the previous acquisition of assets from miner BHP Group (LSE:BHP) has seen group debt rise. Factors outside of management’s control such as the oil price the weather and currency movements can also influence performance. 

For investors, shareholder returns will remain high on the agenda even after CEO Dudley hands over to Bernard Looney following these results. Cashflow, bolstered by an ongoing business divestment programme, underpin returns. BP bought back 184 million shares in the fourth quarter. A 2.4% increase in the dividend payment leaves the historic and forward dividend yield at over 6%. In all, BP continues to justify its place within a balanced and diversified portfolio. 

Positives: 

• Shareholder returns a focus
• A reduction in debt is being targeted
• Gulf spill payments expected to fall below $1 billion in 2020 (2019: $2.4 billion)
• Growing its low carbon businesses

Negatives:

• Group debt has risen following the acquisition of BHP assets
• Full-year 2020 production is expected to decline
• Subject to factors outside of its control such as the weather and coronavirus
• Fossil fuels are linked with climate change

The average rating of stock market analysts:

Strong buy