BP – Investment Plans And Shareholder Pay-Outs Survive Profit Tumble

BP Stock
  • Revenues down 13.6% to $48.5bn
  • Underlying replacement cost profit nearly halved to $2.6bn
  • Quarterly dividend hiked 10%, further $1.5bn of buybacks announced

BP’s Earnings

BP plc (LON:BP) has been unable to escape the heavy blow to profits dealt by lower commodity prices this earnings season, and investors will be disappointed by today’s earnings miss.

As a result, BP has unashamedly pushed shareholder returns to the top of its priority list, and has scope to continue raising the dividend over the rest of the year even if oil prices come under further pressure. It was pleasing to see this come without a cut to guidance on capital investment.

There are significant projects in the pipeline both in economically attractive oil fields, such as phase 2 of the Mad dog project in the Gulf of Mexico, and entry into the European offshore wind market. BP needs to keep the pace of investment high if it wants to sustain growth in shareholder returns, and develop resilience against oil price volatility over the longer term.

Article by Derren Nathan, head of equity analysis at Hargreaves Lansdown