BP Pops on Assets Sales and Shareholder Payouts
As we make our way further into earnings season we reach a highly anticipated slew of energy reports. Everyone’s least favorite oil company, BP (NYSE:BP) , which trades as an ADR here in the United States kicked off the results season on Tuesday with forecast beating profits, a dividend hike, plans for asset sales, and a promise to keep a spending tight. Adjusted for one-time items, the company generated $3.7 billion in profit. Down 25 percent from the previous year but exceeded analysts’ consensus forecast by about 15 percent.
The company decided to scale back its guidance on capital spending next year to $24 billion to $25 billion compared with previous guidance of $24-$27 billion for the years up to 2020. In an effort to keep shareholders happy BP raised its quarterly dividend by 5.6 percent to 9.5 cents a share and stated it would sell $10 billion of assets over the next two years. The proceeds from these planned sales will further improve shareholder payments as most of the proceeds will go directly to shareholders. A higher rate of disposals than previously promised under a program aimed at jettisoning $2 to $3 billion dollars worth of assets per year until 2020.
BP has already sold $38 billion of assets to pay for the mess it made during the 2010 Gulf of Mexico oil spill. BP recently won a small victory over the oil spill and to reflect that, it derecognized about $400 million of provisions within the $20 billion fund it has set aside for certain types of compensation. Moreover, asset sales have become a trend throughout the sector as it fights rising costs and potentially lower oil prices in future.
Shares of the company are higher by a market leading $2, 4 percent, to $45.72 at the time of this writing. It seems likely we see a number of the other energy behemoths follow in the company’s footsteps in the coming days.
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