BP's dividend payout is back.
That'll be a relief to its existing shareholders. And the company is full of plans to rejuvenate itself after a miserable 2010. It'll be a slimmer but "stronger" and "more agile" company by the time new chief executive Bob Dudley is through with it.
Against that, its grand deal with Russian energy giant Rosneft is already causing friction with its other Russian partners.
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So if you don't already own BP, should you be piling in now?
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BP's future smaller but safer
BP's fourth-quarter profit missed analysts' expectations. The underlying replacement cost profit (which excludes one-off costs and adjusts for changes in oil and gas inventories) came in at $4.4bn, against the $4.9bn expected.
It's a little disappointing, but not that big a deal in the grand scheme of things. What most shareholders probably cared about was the dividend. It's being reinstated, as expected. BP will pay $0.07 per share for the final quarter of 2010 the sterling equivalent will be declared in March. That's down from $0.14 per share before the Gulf of Mexico spill. It suggests the company's dividend yield for the year ahead will be around 4%-odd.
Chief executive Bob Dudley will be discussing the company's results and providing a strategy update this afternoon. We'll be watching out for any major new announcements. But he seemed to sum up the general idea in an email to employees today. "The BP of the future will be a smaller BP. But it will also be a safer BP, a more agile BP and a stronger BP." Part of the slimming down is a plan to sell off half of its oil refining capacity in the US.
What's really worrying BP investors right now
Of course, what's really concerning BP investors at the moment is the fall-out from its recent deal with Russia's Rosneft. I noted at the time that the deal increased BP's political risk. But I didn't expect it to materialise quite as quickly as it has.
It turns out that BP's Russian partner in the TNK-BP joint venture doesn't like the deal. AAR, a consortium of four oligarchs which owns the other half of TNK-BP, has voted to block a fourth-quarter $1.8bn dividend payment. BP would have been due to get $900m of this.
Basically, AAR wants TNK-BP to be "the main vehicle for BP's business activities in Russia", reports The Times. The company has asked the High Court in London to put a stop to the deal. If the judge rules in favour of AAR, reports The Telegraph, "the matter will be referred for arbitration in Sweden, as per the TNK-BP shareholder agreements".
This may be just sabre-rattling the option is open for AAR to reinstate the dividend. But it is irritating and slightly concerning. At the time, most people including myself, I'll admit thought that Mr Dudley presumably knew what he was doing from past experience in Russia. And maybe this is exactly what he expected from AAR.
But it doesn't bode well that you can announce a ground-breaking deal then end up with a very public dispute blowing up over it just weeks later.
Now I'm sure BP will get over this latest hitch. It's in everyone's interests to resolve it somehow. And with the oil price continuing to rise, it's a sector you want to be exposed to. As I said last time, if you're holding BP, I wouldn't rush to sell it now.
Should you buy BP?
But if you haven't yet bought in? I'm not so sure. I've been quite unflattering about Russia in the past. This isn't down to any personal prejudice. I simply don't like having to worry about political manipulation when I invest. It's bad enough having to deal with a world where Western governments pick and choose favoured sectors such as banks and car manufacturers. The last thing I want is to have to second-guess the arcane inner workings of the Kremlin and its relationship and power struggles with the various oligarchs.
I can see that it has its attractions. There are many opportunities in Russia. And the TNK-BP joint venture has certainly been a good investment for BP in purely financial terms. Liam Halligan of Russian investment specialists Prosperity Capital Management reckons that for an investment of around £5bn, BP has got back around £16bn to £18bn in dividend payments alone.
But for all that, my gut feeling is that in a world full of other decent potential investments, who needs the hassle? BP's hardly the only listed oil stock in the world, and at this price it's just not that compelling. If you're looking for a dividend play, then Royal Dutch Shell still yields more, for example.
And if you're happy with Russian political risk, then why not just buy into Russia direct? Both the stock market and the economy are highly geared towards the oil price. If you believe it's going to carry on up, then you can reap the rewards of risking your money in Russia directly. My colleague James McKeigue wrote about the Russian market just before Christmas you can read his take on it here.
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