New York Times: BP to Increase Cash Dividends to Investors

By HEATHER TIMMONS

Published: March 30, 2004 

LONDON, March 29 - BP pledged on Monday to return extra cash to its shareholders in the form of dividends and stock buybacks over the next three years as long as crude oil prices remain firm, saying that it was stepping back from its strategy of growth by acquisition.

BP, the second-largest publicly traded oil company behind ExxonMobil, also said that it expected production to increase 5 percent a year through 2008, up from previous estimates of 3 percent a year.

"Shareholders have been patient while our portfolio developed," BP's chief financial officer, Byron Grote, said during a presentation to analysts and investors here. "Now we're committed to delivering to our owners their rewards," he said. BP could pay out as much as $33 billion to shareholders in the next three years.

The new strategy is a departure for BP, which grew through the 1998 purchase of Amoco and the 2000 deal for the Atlantic Richfield Company, better known as Arco.

BP has built itself into a major oil company, the chief executive, Lord Browne, said, "The challenge now is to demonstrate the value of those moves."

Instead of doing deals, BP intends to "distribute 100 percent of all excess free cash flow to our shareholders" in the next three years, as long as oil prices stay over $20 a barrel, Lord Browne said. At BP, oil prices averaged $32 a barrel in the first quarter of 2004. In New York, crude oil ended at $35.45 on Monday. At $20 a barrel, the policy would translate into $7 billion a year in share buybacks and dividends, Mr. Grote said. If oil prices stay above $30 a barrel, BP could give shareholders back as much as $11 billion a year. Already this year, BP repurchased 155 million shares for $1.25 billion.

BP executives also defended the company's accounting of its oil and natural gas reserves. Such accounting has come under scrutiny after Royal Dutch/Shell Group surprised investors in January, when it announced that it had overstated its proven reserves of oil and natural gas by 20 percent.

Mr. Grote said that he was confident that BP's reserves meet Securities and Exchange Commission requirements, and that BP books its reserves conservatively.

Shell executives, meanwhile, have made some moves to try to smooth strained relations over the last week, by sitting down with large investors to listen to their concerns.

Shell said on Monday that Henny de Ruiter, a member of the board of one of Shell's two component companies, Royal Dutch Petroleum, would retire in June. Mr. Ruiter, who is 70, will be succeeded by Christine Morin-Postel, a former executive vice president at Suez.

Shell continues to be plagued by questions over its accounting and auditing. Ryder Scott, the outside firm hired to audit Shell's reserves, is being sued by the private equity firm Hicks, Muse, Tate & Furst for its work with Coho Energy, Bloomberg News reported on Monday.

A suit filed in Dallas contends that "Coho and Ryder Scott were jointly laboring to overstate Coho's proven reserves," Bloomberg said. Ryder has denied the accusations.

http://www.nytimes.com/2004/03/30/business/worldbusiness/30petrol.html