8th Feb 2005 07:02
BP PLC08 February 2005 February 8, 2005 BP BOOSTS DOLLAR DIVIDEND BY 26 PER CENT BP today announced a 26 per cent boost to its fourth quarter dollar dividendcompared with last year, the biggest single increase in its recent history. Citing the "strong prevailing circumstances of the Group, along with futureinvestment patterns and the forward trading environment", chief executive LordBrowne said BP had decided to make a significant one-time step-change in thedividend from 7.1 to 8.5 cents a share. "Thereafter, we would expect to grow the dividend in line with our view offuture sustainable performance. We estimate that this level of dividend allowsus to maintain prudent earnings cover even if oil prices went down to $20dollars a barrel," he said. Previewing an update on Group strategy to financial analysts scheduled for latertoday, Browne said: "We are aware that many of our investors are sterling-basedand that the dollar's weakness has had an impact on their sterling cash flows.This change will be to their benefit, with a sterling increase of 23 per cent inthe fourth quarter dividend compared with last year. "For the year as a whole, dollar-based investors will see an increase of 13 percent and sterling-based investors a rise of 4 per cent." Browne said the company had bought back more than $7.5 billion of shares during2004 and remained committed to returning "100 per cent of excess free cash flowto investors so long as oil prices remain above $20 a barrel, all other thingsbeing appropriate. "Looking at the potential cash that could be distributed over 2005 and 2006through share buybacks and dividends, assuming an oil price of $30 a barrel anddepending on refining margins and other factors, the total amount available fordistribution could be around $23 billion. "We could use some of the excess free cash flow, for example, for materialacquisitions if we saw opportunities which fitted our strategy. But we see nosuch opportunities at present." Commenting on BP's record replacement cost profit of $16.2 billion for 2004, up26 per cent from the previous year, Browne said the company was in a strongfinancial condition. Post-tax cash flow for the year totalled $24 billion, arise of 42 per cent from 2003, and gearing stood at 24 per cent. "Our strategy is on track and unchanged, our operations are in line with ourprevious indications, and we have a strong base of material assets and marketsfor a sustainable future." In Exploration and Production, he said that on a UK GAAP basis the company hadmore than replaced annual output for the 12th year running - by 106 per cent forthe Group and 110 per cent, including equity-accounted entities such as in AbuDhabi and TNK-BP. Major discoveries were made in Egypt, Sakhalin, the deepwater Gulf of Mexico,Trinidad and Angola, adding more than 1 billion barrels of oil equivalent toBP's resource base over the year. Production in existing profit centres, mainly Alaska and the North Sea, showed anet decline of between 4.5 and 5 per cent, a trend expected to continue at anannual average rate of 3 per cent out to 2008. This was partly offset by a risein output from new profit centres to over 1 million barrels a day of oilequivalent - a figure likely to increase substantially in 2005. Capital expenditure in existing profit centres rose from $3.2 billion in 2003 to$3.5 billion last year and is expected to rise to some $3.6 billion this year asa result of specific oil field inflation and a weaker dollar. Capex in newprofit centres was $6.3 billion in 2004 and, with new project spending now overits peak, is expected to fall to some $6 billion this year. TNK-BP's 2004 oil production rose nearly 14 per cent to 1.45 million barrels aday, or 1.66 million barrels including the 50 per cent of Slavneft added at thestart of the year. Output is estimated to grow by some 5 per cent this year.Capex, which is self-funded, was $1.5 billion in 2004, up from around $1 billionin 2003, and is expected to reach approximately $1.8 billion this year as newprospects are developed, including new extensions to Samotlor and the Uvatproject, both 1 billion barrel development options in West Siberia. "Since the formation of TNK-BP, the total investment we've made has been $5.3billion and the total dividends received have been $2.2 billion," Browne said. Group production as a whole grew by 11 per cent in 2004. Output for 2005 wouldlikely hit 4.1 million to 4.2 million barrels a day of oil equivalent beforedivestments, keeping BP on track to average annual production growth in excessof 5 per cent for the period 2004-2008. The exact level would depend on oilprices, the extent of divestments and various other factors. Capex forExploration and Production would likely be between $9.5 billion and $10 billionin 2005 and 2006, depending on foreign exchange impacts and inflation. Capex in refining would be level in 2005 at around $1.3 billion. "The majorityof our refining capacity is in the US where margins are structurally advantagedand our refineries are in the top quartile on net cash margins and return oninvestment. In Europe, after the divestment of Lavera and Grangemouth, ourposition should improve considerably. In retail, where store sales continue togrow, along with sales of BP's Ultimate premium fuel, capital spending wouldalso remain stable at around $950 million this year," Browne said. "Our global gas sales rose to 32 billion cubic feet a day in 2004. In NorthAmerica, where BP is the leading marketer, our gas sales were up 16 per centover 2003. Going forward, we expect medium-term global growth of 2 to 3 per centa year, in line with world gas demand, and we will concentrate increasingly oncustomers who best fit our capabilities." In petrochemicals the company was on track with plans to divest the bulk of itsolefins and derivatives business in phases commencing in the second half of thisyear, probably by way of an IPO, subject to market conditions and necessaryapprovals. BP spent $200 million in its high-growth aromatics and acetylsbusiness which generated competitive cash returns in 2004 - a figure likely torise slightly this year as the company invests to keep its leadership positionin the segment. Browne said he expected capital spending for BP as a whole to total some $14billion in 2005. "The exact level will depend on the level of the dollar and ourcontinuing track record of offsetting normal underlying annual inflation of some2 per cent. For the medium term an investment level of around $14 billion is areasonable expectation. "Divestments, with the exception of olefins and derivatives, are not presentlyexpected to be large this year. We expect proceeds of around $1.3 billion,comprised of the balance due from the sale of Ormen Lange and normal portfoliooptimisation." Commenting on the oil price, he said that while he expected that demand for oilin 2005 would moderate compared to last year, "we've concluded that on the basisof the supply-demand balance and OPEC's five-year track record of maintainingproduction discipline, oil prices are likely to have a support level of around$30 a barrel for at least the medium term. "As far as BP is concerned we will continue to use a Brent oil price of $20 abarrel for the purpose of testing projects and planning our activity level inexploration and production. This allows us to maintain a portfolio of activitieswith strong returns." Browne said that, while BP had been helped by the environment, "our success sofar is due to our combination of strategy and discipline. Over the past fewyears we have built a strong base for the Group with material assets and marketsinto which we are investing. We're achieving the targets for growth we setourselves, we're improving quality and we're maintaining financial strength. "Importantly, in spite of the significantly better than expected tradingenvironment, we are maintaining a disciplined approach to the execution of ourstrategy and consequently making sure that excess free cash flows areappropriately distributed to shareholders." - ENDS - This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
BP