Hint of dividend rise as BP sustains recovery


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
ebooksA celebration of British elections
  • Get to the point
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

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

iJobs Job Widget
iJobs Money & Business

Ashdown Group: Editor-in-chief - Financial Services - City, London

£60000 - £70000 per annum + benefits : Ashdown Group: A highly successful, glo...

Ashdown Group: Junior Application Support Analyst - Fluent German Speaker

£25000 - £30000 per annum + benefits: Ashdown Group: A global leader operating...

Guru Careers: Management Accountant

£27 - 35k + Bonus + Benefits: Guru Careers: A Management Accountant is needed ...

Guru Careers: Project Manager / Business Analyst

£40-50k + Benefits.: Guru Careers: A Project Manager / Business Analyst is nee...

Day In a Page

General Election 2015: Ed Miliband's unlikely journey from hapless geek to heart-throb

Miliband's unlikely journey from hapless geek to heart-throb

He was meant to be Labour's biggest handicap - but has become almost an asset
General Election 2015: A guide to the smaller parties, from the the National Health Action Party to the Church of the Militant Elvis Party

On the margins

From Militant Elvis to Women's Equality: a guide to the underdogs standing in the election
Amr Darrag: Ex-Muslim Brotherhood minister in exile still believes Egypt's military regime can be replaced with 'moderate' Islamic rule

'This is the battle of young Egypt for the future of our country'

Ex-Muslim Brotherhood minister Amr Darrag still believes the opposition can rid Egypt of its military regime and replace it with 'moderate' Islamic rule, he tells Robert Fisk
Why patients must rely less on doctors: Improving our own health is the 'blockbuster drug of the century'

Why patients must rely less on doctors

Improving our own health is the 'blockbuster drug of the century'
Sarah Lucas is the perfect artist to represent Britain at the Venice Biennale

Flesh in Venice

Sarah Lucas has filled the British pavilion at the Venice Biennale with slinky cats and casts of her female friends' private parts. It makes you proud to be a woman, says Karen Wright
11 best anti-ageing day creams

11 best anti-ageing day creams

Slow down the ageing process with one of these high-performance, hardworking anti-agers
Juventus 2 Real Madrid 1: Five things we learnt, including Iker Casillas is past it and Carlos Tevez remains effective

Juventus vs Real Madrid

Five things we learnt from the Italian's Champions League first leg win over the Spanish giants
Ashes 2015: Test series looks a lost cause for England... whoever takes over as ECB director of cricket

Ashes series looks a lost cause for England...

Whoever takes over as ECB director of cricket, says Stephen Brenkley
Fishing for votes with Nigel Farage: The Ukip leader shows how he can work an audience as he casts his line to the disaffected of Grimsby

Fishing is on Nigel Farage's mind

Ukip leader casts a line to the disaffected
Who is bombing whom in the Middle East? It's amazing they don't all hit each other

Who is bombing whom in the Middle East?

Robert Fisk untangles the countries and factions
China's influence on fashion: At the top of the game both creatively and commercially

China's influence on fashion

At the top of the game both creatively and commercially
Lord O’Donnell: Former cabinet secretary on the election and life away from the levers of power

The man known as GOD has a reputation for getting the job done

Lord O'Donnell's three principles of rule
Rainbow shades: It's all bright on the night

Rainbow shades

It's all bright on the night
'It was first time I had ever tasted chocolate. I kept a piece, and when Amsterdam was liberated, I gave it to the first Allied soldier I saw'

Bread from heaven

Dutch survivors thank RAF for World War II drop that saved millions
Britain will be 'run for the wealthy and powerful' if Tories retain power - Labour

How 'the Axe' helped Labour

UK will be 'run for the wealthy and powerful' if Tories retain power