BP finally out of the red after blackest period in its history

Shareholders may be about to see some dividend after oil giant returns to profit

(BLOOMBERG)

BP raised expectations for an early return of its multibillion-pound dividend after announcing yesterday that it had returned to profit in the third quarter of the year.

The company is still spending $40m (£24.7m) per day to restore the Gulf of Mexico after the world's worst-ever oil spill and the costs of the clean-up and compensation have hit $39.9bn , it said. But a new surge in the price of oil means more revenues are coming in to the company and it has also made progress with a plan to sell about $30bn of assets across the globe to raise funds.

BP suspended its dividend in June, when oil was still gushing from its ruptured Macondo well, when public anger in the US was at its height and there were real concerns about whether the company would be able to survive. At the time, it said there would be no more payouts in 2010 and the issue would be revisited at the time of the fourth-quarter results, which are due next February.

Byron Grote, the chief financial officer of BP, said yesterday that no decisions hadd yet been taken "but the improving financial condition of the company and the strength of our disposal proceeds are encouraging".

The company could announce either "a dividend payment or a dividend policy" in February, he added.

The oil giant had been expected to pay out a total of $10bn in quarterly dividends for 2010 and the suspension of the payments proved a hit to UK pension funds and other investors. Due to its size and the erstwhile stability of its business, BP had accounted for £1 out of every £7 paid out in dividends by UK companies.

The Macondo well ruptured in April after an explosion that killed 11 workers and sank the Deepwater Horizon rig. Results for the three months to 30 September showed BP having to make a further $7.7bn in provisions to cover the cost of the disaster, taking the total close to $40bn.

Although Macondo had already been capped by the time of the last results, it took until September to activate a relief well that finally sealed it.

The extra provisions held BP's third-quarter net income back to $1.8bn, compared with $5.3bn for the same period last year, but that represented a large rebound from a $17.2bn loss in the three months to 30 June. Bob Dudley, BP's boss in the US, who was put in charge of repairing the well and cleaning up the spill and has since been elevated to chief executive of the whole group, said the company was "well on track for recovery", although he said it would not be attempting to expand its Gulf of Mexico operations any time soon.

"It wouldn't be sensible for us to be the first one to raise our hand and rush in with a permit," he added. "We are still embedding the lessons from this incident."

Mr Dudley took over the top job one month ago after the departure of Tony Hayward, whose gaffe-prone public appearances were judged to have inflamed public and political opinion against the company.

BP has been paying into a $20bn ring-fenced compensation account, which is being doled out to individuals and businesses affected by the disaster on the basis of rulings by an independent attorney, Ken Feinberg. But much uncertainty still remains over the ultimate cost of the spill to BP, not least because it is not known how much liability it will be able to share with its contractors and partners in the Macondo well. BP says it was not itself "grossly negligent" and has been working out the likely costs of the disaster based on that assumption.

Last week, a US presidential commission declared that Halliburton, which made the cement supposed to control the well, had known that the material could have been unstable. And yesterday, the Japanese firm Mitsui, which owns 10 per cent of the well, said it had been billed $1.9bn by BP to cover costs of the spill, but was currently withholding payment.

BP's shares closed 7.65p higher at 431.65p last night. Richard Griffith of Evolution Securities in London said the market appeared to expect that the total costs of the spill would continue to rise, but that the worst might in fact already be behind the company. He said: "We maintain our 'buy' recommendation, as we believe the true liability for the Macondo accident to be nearer $25bn to $30bn, as opposed to the $60bn the market is discounting."