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Dividend boost from departing BP boss

The Looney era is set to begin with more disposals and deleveraging front of mind
February 4, 2020

BP (BP.) has said farewell to chief executive Bob Dudley by increasing its dividend, even as revenue and its profit marker fell last year.

IC TIP: Sell at 465p

The supermajor’s underlying replacement cost (RC) profit for 2019 was down almost a quarter on the year before because of weaker commodity prices and what outgoing finance chief Brian Gilvary described as the “one of the worst refining environments since the financial crisis in 2008”. The quarterly dividend was increased 2.4 per cent for the three months to December, to 10.5¢ (8p). Despite weakness in upstream and downstream earnings, cash flow from operations before Gulf of Mexico payments was up 8 per cent to $28.2bn. 

Incoming chief executive Bernard Looney, who starts this month, said he wanted to reassure investors of his commitment to BP’s “fundamental principals”, and would aim to increase cash flow and cut the company’s debt load. As of 31 December, BP’s net debt was 31.1 per cent of its equity, above the gearing goal of 20-30 per cent. The group said it would get to the mid-point of this goal this year. BP shares rose by as much as 5 per cent on the back of these results. 

The dividend hike came from forecast higher cash flow out to 2021. Mr Gilvary, who will retire mid-year, said added asset sales would continue beyond the $10bn planned for 2019 and 2020. This target has almost been reached, with only $600m in disposals needed, and the company will aim for another $5bn in assets to go out the door by mid-2021. 

Consensus forecasts compiled by Bloomberg put the 2020 underlying RC profit at $10.7bn, a 7 per cent improvement on last year. 

BP (BP.)    
ORD PRICE:465pMARKET VALUE:£94.1bn
TOUCH:464-465p12-MONTH HIGH:583pLOW: 453p
DIVIDEND YIELD:6.9%PE RATIO:30
NET ASSET VALUE:486¢*NET DEBT:53%**
Year to 31 DecTurnover ($bn)Pre-tax profit ($bn)Earnings per share (¢)Dividend per share (p)
2015223-9.6-35.426.38
2016183-2.30.630.50
20172407.217.230.98
201829916.747.030.57
20192788.219.831.97
% change-7-51-58+5
Ex-div:13 Feb   
Payment:27 Mar   
*Includes intangible assets of $27bn, or 135¢ a share **Includes $9.7bn in lease liabilities