Royal Dutch Shell Group .com

The Daily Telegraph: Money gusher under BP


Edited by Neil Collins (Filed: 30/03/2004)

City comment


BP to hand $33bn back to investors


How they must have wept yesterday in the Shell bunker, as they read the annual strategy statement from BP. From the tone of their recent announcements, the two companies could be in different industries. Here is Shell in crisis, the chairman gone, along with 20pc of its reserves, while here is BP, piling them on, boasting of 7pc annual output growth until at least 2008 with plenty more left in the tank.


It's not only oil that's pouring out for BP, it's money. Chief executive Lord Browne finds himself in the happy position of having too much of it, so he's promising to continue the "progressive" dividend policy, while still having billions left over to buy back BP shares.


Perhaps the most remarkable theme in his bouncy statement was the continuing prospects for generating more cash than he can spend. Provided the oil price stays over $20, BP will be able to fund all its projects and have money left over, barring only "acquisitions it cannot currently foresee".


As Lord Browne says, forecasting the oil price is impossible and $20 has been the long-run average, but when a barrel of crude costs rather more than $30, "there appears to be overwhelmingly more chance of the oil price being above $20 a barrel for the next few years, than not."


Few would disagree, and his leadership currently looks inspired. The purchase of Amoco (still carefully described as a "merger") was executed when oil cost less than $10 a barrel, surely a price which will never be seen again, and the gamble on Russia is already paying dividends. It looks an altogether better place to do business than Nigeria, which was the only alternative big enough to make an impact on BP.


Lord Browne could be tempted to start believing his own publicity, and the first sign that he is doing so would begin to make a case for selling these shares. If only he could offer to buy Royal Dutch/Shell instead of all those buybacks.

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