Daily Telegraph: BP proves slippery when it comes to dividend: BP profit £1m per hour as oil price soars: “It is an unfortunate consequence of BP behaving like a true multinational, where the interests of real shareholders in Britain come a long way down the list. Still, it could be worse. They could be shareholders in Shell.” (ShellNews.net)
27 Oct 04
BP is one of the most successful companies in the world. It may not have magicked vast value from computer software like Microsoft, or from the internet like Google, but oil is a slippery business, and making money is often harder than BP makes it look.
Yesterday Britain's most valuable company produced some glittering third-quarter results, and today it gets its reward: a pillorying in the popular press. The argument is the usual tired one about the contrast between its vast profits and the price of a litre, and it says much about our attitude to enterprise.
BP's profits have practically nothing to do with the price of petrol, three-quarters of which goes straight to the government, and most of the rest is in the cost of crude oil. Countless inquiries have shown that fuel retailing is a highly competitive business (even if the tanks do sometimes contain someone else's gasoline) and whenever the oil majors try to push up their margins, the supermarkets undercut them.
Instead, we should celebrate how under chief executive Lord Browne, BP took over not one but two of the American majors while oil prices were depressed. That foresight is paying off handsomely with BP posting higher profits and more production. We must wait for the full-year results to learn whether reserves are also up, to see whether the hat-trick which is the aim of big oil everywhere is achieved.
The fly in the ointment, at least for British investors, is the tiny rise in the third-quarter dividend. BP accounts in dollars, the currency of the industry, and the dollar's fall has more than wiped out the whole of the 8.8pc increase for the first three quarters of the year.
It's precious little help to retail investors to know that the $5.5billion share buyback programme has cut the cost of paying dividends, especially when there are earnings of 57.4c to cover the payout of 20.95c. BP has more cash than most banks, plenty of cover for the dividend, and the prospect of high oil prices for the forseeable future. The sterling cut looks pedantically mean.
It is an unfortunate consequence of BP behaving like a true multinational, where the interests of real shareholders in Britain come a long way down the list. Still, it could be worse. They could be shareholders in Shell.