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So is BP worth investing in?

Tuesday, Feb 04, 2014 - 02:16

Feb.04 - BP has reported a sharp drop in fourth-quarter profits due to refinery losses and more oil spills costs. But it's still winning back investors. Hayley Platt finds out why.

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It's been a difficult time for many big oil companies And BP's 37 percent fall in fourth quarter profit pushed shares down almost 2%. The company partly blamed weakness in its refining business. That's no surprise, says BGCs' Mike Ingram. SOUNDBITE: Mike Ingram, Senior Strategist, BGC Partners, saying (English): "The profitability of refining particularly in Europe is an issue that the oil majors are struggling with pretty much everywhere and one of the reasons why a lot of oil majors are getting out of that business." Rising costs from the Gulf of Mexico oil spill are also hurting. But almost four years after the disaster - which killed 11 men and almost sunk the company - BP is beginning to win back investor confidence. Sarbjit Chahal is from Fat Prophets. SOUNDBITE: Sarbjit Chahal, Equity Analyst, Fat Prophets, saying (English): "Obviously the Deepwater Horizon crisis has affected the balance sheet but what they've managed to do is sell off large parts of the business which has ultimately bought the company back to a level where they're not in a particularly large amount of debt. The gearing level they wanted to keep it between 10 and 20 percent and it's currently at 13.3 percent, so they've achieved their targets." The road to recovery hasn't been easy. BP has sold $40 billion worth of assets. It's total oil spill provision has now risen to $42.7bln. With almost $4 billion already paid to more than 40,000 claimants. But dividends returned three years ago at CEO Bob Dudley's insistence and that's encouraged investors. SOUNDBITE: Sarbjit Chahal, Equity Analyst, Fat Prophets, saying (English): "From our perspective we've seen management confidence as they've increased dividend payments three times since the Deepwater Horizon crisis, and a key point for BP is that they're looking to increase operating cash flows by 50 percent from their 2011 and they're on course to achieve that." BP's still facing a civil case in the U.S. courts. If found guilty under the Clean Water Act it could be fined $18 billion. It's also barred from winning new contracts in America. And then there's the challenge from falling oil prices. But BP has made an impressive comeback - two months after the spill shares had lost two thirds of their value . Now, if you include dividends, investors are only 10% down.

So is BP worth investing in?

Tuesday, Feb 04, 2014 - 02:16

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