Hint of dividend rise as BP sustains recovery

BY TOM STEVENSON

Deputy City Editor

David Simon handed over the reins at a confident BP yesterday, holding out the prospect of a second dividend rise in six months after bumper first quarter figures. Yesterday's results were the last he will present before being succeeded as chief executive in July by former exploration division head John Browne.

Although the dividend was maintained at 3p a share, the same level as last year's fourth quarter payout, Mr Simon said the rate could be increased after interim results if progress continued at the current rate.

Analysts now expect a return by 1998 to the level of dividend paid by the company before the payout was abruptly halved in 1992 after the departure of Robert Horton. He was forced to resign after refusing to lower the dividend in the face of a rapid deterioration in the oil giant's financial position in the early 1990s.Since 1992, BP has staged a remarkable recovery in fortunes matched by a steady rise in the company's share price from a low of 185p to yesterday's close of 462p, up 6.5p.

First quarter figures, with underlying profits up from £305m to £461m, revealed mixed fortunes in the group's three core divisions, with booming chemicals more than making up for an abrupt decline in refining and marketing margins. Exploration, which accounts for most of the group's assets and profits, showed strong growth in operating profits from £378m to £543m on the back of a rising oil price.

A rise of $3 per barrel in the price of crude oil over the past year had surprised the company, Mr Simon said. After the misguided expectation in the early 1990s of a sustainable oil price of between $20 and $25 a barrel, BP has been assuming no more than $16 a barrel as the basis for exploration evaluations.

Currently, Brent crude is trading at more than $18 a barrel, with a strong rise within the last month yet to show through into profits. Demand is strong and fears over Iraqi production have so far proved unfounded.

John Browne said the result reflected some improvement in the oil price, sustained operating efficiencies partly due to technological advances, and lower exploration write-offs thanks to the decision three years ago to focus oil searches in more fruitful areas.

These improvements more than offset a one-off £28m payment to the state of Alaska to cover settlement of a long-standing royalty dispute. Production from new fields made up for declines from some of BP's more mature fields.

Profits from chemicals jumped from £25m to £244m in the first quarter thanks to high-capacity utilisation, recovering demand in Europe and a lower cost base. Mr Simon said the division was now producing a more acceptable return on capital employed for the current stage in the economic cycle, even though prices and margins are still below those achieved at the peak of the market in 1989.

He said the division did well in the quarter thanks to its bias towards Europe, where industry is recovering fast. BP is more heavily weighted towards the mature economies of Europe and US than its international rivals and, the success of chemicals aside, Mr Simon said BP was still planning to increase its exposure to the fast-growing regions of South-east Asia and South America.

Chemicals' strong performance made up for a 30 per cent drop in refining and marketing margins reflecting too much capacity and a mild winter. Profits fell from £214m to £43m, with refining hit especially hard as gasoline prices fell in the US.

Investment Column, page 34

Suggested Topics
Start your day with The Independent, sign up for daily news emails
Sport
England's women celebrate after their 3rd place play-off win against Germany
Women's World CupFara Williams converts penalty to secure victory and bronze medals
Arts and Entertainment
Ricardo by Edward Sutcliffe, 2014
artPortraits of LA cricketers from notorious suburb go on display
News
newsHillary Clinton comments on viral Humans of New York photo of gay teenager
Arts and Entertainment
The gang rape scene in the Royal Opera’s production of Gioachino Rossini’s Guillaume Tell has caused huge controversy
music
ebooks
ebooksAn introduction to the ground rules of British democracy
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Recruitment Genius: Sales Assistant / Buyer

£15000 - £17000 per annum: Recruitment Genius: This company offers a range of ...

Recruitment Genius: Customer Service Advisor

£15000 - £16000 per annum: Recruitment Genius: Customer Service Advisors are r...

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + OTE £45K: SThree: SThree were established in 1986....

Recruitment Genius: Compliance Manager

£40000 - £60000 per annum: Recruitment Genius: A Compliance Manager is require...

Day In a Page

The Greek referendum exposes a gaping hole at the heart of the European Union – its distinct lack of any genuine popular legitimacy

Gaping hole at the heart of the European Union

Treatment of Greece has shown up a lack of genuine legitimacy
Number of young homeless in Britain 'more than three times the official figures'

'Everything changed when I went to the hostel'

Number of young homeless people in Britain is 'more than three times the official figures'
Compton Cricket Club

Compton Cricket Club

Portraits of LA cricketers from notorious suburb to be displayed in London
London now the global money-laundering centre for the drug trade, says crime expert

Wlecome to London, drug money-laundering centre for the world

'Mexico is its heart and London is its head'
The Buddhist temple minutes from Centre Court that helps a winner keep on winning

The Buddhist temple minutes from Centre Court

It helps a winner keep on winning
Is this the future of flying: battery-powered planes made of plastic, and without flight decks?

Is this the future of flying?

Battery-powered planes made of plastic, and without flight decks
Isis are barbarians – but the Caliphate is a dream at the heart of all Muslim traditions

Isis are barbarians

but the Caliphate is an ancient Muslim ideal
The Brink's-Mat curse strikes again: three tons of stolen gold that brought only grief

Curse of Brink's Mat strikes again

Death of John 'Goldfinger' Palmer the latest killing related to 1983 heist
Greece debt crisis: 'The ministers talk to us about miracles' – why Greeks are cynical ahead of the bailout referendum

'The ministers talk to us about miracles'

Why Greeks are cynical ahead of the bailout referendum
Call of the wild: How science is learning to decode the way animals communicate

Call of the wild

How science is learning to decode the way animals communicate
Greece debt crisis: What happened to democracy when it’s a case of 'Vote Yes or else'?

'The economic collapse has happened. What is at risk now is democracy...'

If it doesn’t work in Europe, how is it supposed to work in India or the Middle East, asks Robert Fisk
The science of swearing: What lies behind the use of four-letter words?

The science of swearing

What lies behind the use of four-letter words?
The Real Stories of Migrant Britain: Clive fled from Zimbabwe - now it won't have him back

The Real Stories of Migrant Britain

Clive fled from Zimbabwe - now it won’t have him back
Africa on the menu: Three foodie friends want to popularise dishes from the continent

Africa on the menu

Three foodie friends want to popularise dishes from the hot new continent
Donna Karan is stepping down after 30 years - so who will fill the DKNY creator's boots?

Who will fill Donna Karan's boots?

The designer is stepping down as Chief Designer of DKNY after 30 years. Alexander Fury looks back at the career of 'America's Chanel'