Oil major BP attempted to reassure investors that it will be able to maintain its dividend, as it unveiled a 40% drop in underlying profits over the last quarter. In the three months to the end of September, BP's profit fell to $1.8bn (£1.2bn) significantly lower than the $3bn reported in the same period last year. The results are a direct impact of collapsing oil prices: Brent crude has fallen from $90 a barrel a year ago to roughly $47 today.
BP's chief executive, Bob Dudley, said that the company can maintain the dividend if prices recover to $60 a barrel by 2017. Even if they remain lower, the firm could weather the storm by further cutting costs, he claimed. BP has already made $3bn in cost savings this year, including laying off staff: headcount will have fallen by 4,000 by year end.
What the commentators said
Hence while BP had previously been among the more pessimistic in the industry with its oil price assumptions, that's no longer the case, said Sarah Kent in the Wall Street Journal. It's now well "within the scope of current forecasts".
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Still, there are other factors that come into play for vertically integrated firms such as BP. "Low oil prices are not all bad news for integrated oil companies," said the BBC's Kamal Ahmed. Yes, it's tough for their upstream business (the exploration and production divisions, which find and extract crude oil). But it can provide a substantial boost for their downstream business, which refine crude into fuels such as gasoline and diesel, and make the petro chemicals that go into things such as paint and plastic. It's notable that while BP's upstream profit slumped from $3.9bn to $800m, its downstream profit climbed from $980m to $2.3bn.
-
Lloyds axes foreign currency fees for Club Lloyds customersClub Lloyds customers will be able to withdraw their money abroad without incurring any extra fees
-
How to invest during stagflationTrump’s tariffs look poised to push the global economy into a period of stagflation. We look at how to ensure your investments can survive a global slowdown.
-
BP’s profits surge, but the company’s growth is far from guaranteedAnalysis BP profits are at their highest in a decade, and it looks to be a business firing on all cylinders. But its future is far from certain, says Rupert Hargreaves.
-
BP: really going “beyond petroleum” won't be easyNews BP is recovering and plans to become carbon neutral by 2050. Meanwhile, activist investors are targeting ExxonMobil. Matthew Partridge reports
-
BP looks set to return more money to shareholders as it beats expectationsNews Oil major BP is to embark on a share buyback programme after significantly reducing its debts. Saloni Sardana looks at what it means for your portfolio.
-
BP has slashed its dividend – and markets love itOpinion BP has bowed to the inevitable and cut its dividend in half – and its share price promptly rose. John Stepek explains what it means for shareholders and for beleaguered income investors.
-
BP bows to reality as it writes down $17bn of assetsNews The oil giant has ditched its conspicuously bullish outlook and written down the value of its assets. Will it cut its dividend too? Matthew Partridge reports
-
Watch out income investors – BP looks likely to cut its dividend in the near futureOpinion Oil major BP is writing billions off the value of its assets as it struggles to adapt to the changing world. Unlike Shell, however, BP hasn’t yet cut its dividend. But, says John Stepek, it’s only a matter of time till it does.
-
How reliable is your income from dividend payouts?Tutorials Many blue-chip stocks are stretching their dividend payouts to the limit. Make sure you don’t pay the price.
-
Navigating a low oil priceOpinion The low price of oil has thrown up a few opportunities for canny investors. Professional stockpicker Simon Gergel reveals three of his favourites.
