BP ratchets up quarterly dividend

The group's share price ticked-up by just under 4 per cent, despite the fact that net profits were down by a third to $3.59bn (£2.23bn) on the back of contracting refining margins and the shortfall linked to the Russian TNK-BP sale, although this was partially offset by the contribution from BP's stake in Rosneft ($808m). Underlying replacement cost profits, which strip out the effect of oil price movements, came in at $3.69bn, against $5.02bn for the corresponding period in 2012. Total production was also in decline with a daily rate of 2.207m barrels of oil equivalent down by 2.3 per cent from last year.

This was hardly a stellar operating performance on the face of it, but BP's underlying profits were actually around $502m to the good on the consensus estimate. Fuelled by higher liquid and gas realisations, BP's upstream segment experienced a 1.3 per cent year-over-year increase in underlying profits, but the aforementioned refining margin problems, combined with the sale of the Texas City and Carson refineries, meant that the downstream segment's profits slumped to $720m from $3bn a year ago. There is little chance that margins will pick up through the remainder of this year, either, due to higher-than-expected oil inventories and new refining capacity coming on-stream.

The good news for shareholders is that BP raised its quarterly divided to 9.5¢ per share (Q312: 9¢), while indicating that it expects to hive off another $10bn in non-core assets before the end of 2015, with the lion's share of receipts earmarked for a future share buy-back programme. BP's largesse might seem a little premature given the uncertainties over the final bill for Deepwater Horizon, but never underestimate the effectiveness of cash incentives. The trouble is that they often encourage people to make investment decisions based on the wrong criteria.