Daily Telegraph UK: The best is yet to come, says BP: “In contrast to Shell, which admitted its reserve replacement ratio had dropped to 45pc to 55pc in the wake of the company's "lost" oil and gas reserves last year, Lord Browne said BP had "more than replaced its output for the 12th year running", with a replacement rate of 106pc for the group” (ShellNews.net) 9 Feb 05
By Christopher Hope, Business Correspondent (Filed: 09/02/2005)
Lord Browne of Madingley yesterday declared that "the best is yet to come" for BP as he unveiled a big jump in the fourth-quarter dividend on the back of record full-year profits, boosted by the surging price of oil.
The BP chief executive said the company had decided to increase the fourth-quarter dividend by 26pc from 7.1 cents to 8.5 cents a share, citing "strong prevailing circumstances" in the oil and gas industry. But British shareholders who are paid in pence get less of the benefit of the rise in the dividend because of the weak dollar.
Shareholders paid in dollars will see a 13pc improvement in their dividends for 2004, while investors who are paid in sterling will get just a 4pc increase.
Lord Browne said: "We're aware that many of investors are sterling-based and that the dollar's weakness has an impact on their sterling cash flows. The one time step change will be to their benefit."
In total, BP said it was planning to distribute $23 billion (£12.4 billion) by the end of next year through share buybacks and dividends to shareholders, assuming that the oil price stays above $30 a barrel. Analysts said the dividend increase should push up the yield on the shares from 3pc to 3.7pc in 2005.
BP posted replacement cost profits up 26pc to $16.2 billion for 2004, less than the $17.6 billion reported by Shell last week, which were a record for a British company. BP's fourth-quarter profits were pegged back by a $1.1 billion charge at BP's chemicals business before part of it is spun off in a likely flotation later this year.
Sixty per cent of the profits rise came from the oil price, which averaged $36.50 a barrel last year. Lord Browne shrugged off calls for a windfall tax on the oil industry, pointing out that BP pays $2 billion in tax and makes $2.5 billion from its UK operations.
In contrast to Shell, which admitted its reserve replacement ratio had dropped to 45pc to 55pc in the wake of the company's "lost" oil and gas reserves last year, Lord Browne said BP had "more than replaced its output for the 12th year running", with a replacement rate of 106pc for the group.
Group production was up 11pc to 4.1m barrels a day and is likely to increase to 4.2m barrels a day in 2005. BP is planning to spend up to $10 billion looking for oil and gas this year out of total capital expenditure of about $14 billion.
BP was helped by a big contribution from the company's Russian 50-50 joint venture TNK-BP, where production jumped by 14pc last year. BP has invested $5.3 billion in the joint venture since October 2002, receiving $2.2 billion in dividends in return. Lord Browne admitted that the Russian government's attempt to break up oil company Yukos "has dented investor confidence" but had not affected TNK-BP.
Overall, the future for BP was bright, he said: "There is growing momentum in our activities and growing confidence in our future. Our commitment to the combination of strategy and discipline is unchanged. And that is why I can still say with great confidence that the best is yet to come."
http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2005/02/09/cnbp09.xml