BP Raises Payout, Adds $5 Billion to Divestiture Targets -- WSJ
February 05 2020 - 03:02AM
Dow Jones News
By Sarah McFarlane
This article is being republished as part of our daily
reproduction of WSJ.com articles that also appeared in the U.S.
print edition of The Wall Street Journal (February 5, 2020).
LONDON -- BP PLC raised its dividend on Tuesday at the same time
as reporting a small loss and extending its planned asset sales by
an additional $5 billion, joining other oil giants in shedding
assets to help maintain shareholder returns.
Last week, Royal Dutch Shell PLC also beefed up its pipeline of
divestments and slowed spending on its share buyback program amid
weaker earnings. And in the U.S., Texas energy giant Exxon Mobil
Corp. has a continuing divestment program targeting the sale of $15
billion worth of assets by 2021.
The wave of divestitures comes as a combination of lower energy
prices and weaker refining and chemical margins are hurting the
sector's profitability.
BP announced an expanded plan to divest $15 billion of assets by
mid-2021, having previously targeted $10 billion in asset sales by
the end of 2020. The company has already unloaded $9.4 billion in
assets since the start of 2019.
Its U.S. gas assets sold for less than expected, BP said,
contributing to impairment charges of $4.5 billion since October,
including $1.9 billion in the fourth quarter.
Income from the divestments helped lower BP's gearing -- the
ratio of net debt to the total of net debt and equity -- to 35%
including leases in the fourth quarter, from 36% in the third
quarter. This remains above the company's long-term target level of
between 20% and 30%.
The combination of lower debt and additional divestments had
given the company confidence to raise the dividend now, said BP's
chief financial officer, Brian Gilvary, in an interview with The
Wall Street Journal.
BP's shares traded 4.4% higher on Tuesday.
Colin Smith, analyst at Panmure Gordon, said the increased
dividend was eye-catching, "particularly as it comes when gearing
is above the top end of the guidance range with the macro outlook
rapidly deteriorating."
The fourth quarter also marked the final set of results overseen
by BP's Chief Executive Bob Dudley. His successor, Bernard Looney,
will take up the role on Wednesday.
He takes control at a difficult time. Adding to the energy
sector's already considerable challenges, the outbreak of
coronavirus is expected to slow economic growth, thereby dragging
on global oil demand growth, particularly in China. Benchmark Brent
oil prices have fallen around 17% since the start of the year to
around $55 a barrel.
"We recognize the headwinds you can see are really around
coronavirus and what that does to the oil price," said Mr.
Gilvary.
BP expects the virus could knock oil demand by between 300,000
and 500,000 barrels a day this year, from a previous expectation of
1.2 million barrels a day of demand growth, Mr. Gilvary added.
Write to Sarah McFarlane at sarah.mcfarlane@wsj.com
(END) Dow Jones Newswires
February 05, 2020 02:47 ET (07:47 GMT)
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