Broker tips ‘recovering’ BP as dividend rises

29th October 2013

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Oil giant BP reported a more upbeat set of results today and has increased its quarterly dividend on the back of a recovering outlook writes Philip Scott.

The FTSE 100 listed firm has been on a path of recovery ever since its Deepwater Horizon oil spill in the Gulf of Mexico three years ago. In April 2010 an explosi0n on the BP-operated Macondo Prospect claimed 11 lives and is often considered the largest accidental marine oil spill in the history of the petroleum industry.

In its third quarter results announced this morning net profits were down by almost 34% from last year at $3.5bn, primarily as a result of a decline of refining margins. Total production for the quarter was 2.207m barrels of oil equivalent per day, down 2.3% from the same time-period in 2012. Operating cash flow was $6.3bn.

The total cumulative net charge to BP as a result of the Gulf of Mexico disaster now amounts to $42.5bn according to The Share Centre. But Helal Miah, investment research analyst at the stockbroker believes that BP is in the realms of transforming itself from the company it was prior to the  oil spill and is progressing well.

He says: “The company remains on track to meet operating cash flow targets. Capital expenditure will remain in the region of $24 – 25bn for 2014 and investors will be pleased that the quarterly dividend has been raised by 5.6% to 9.5 cent.”

The past three years has seen the group’s shares edge up by just 11% but notably over the past year, the stock has increased by the same amount to trading at around the 473.5p mark, as at 29 October.

Miah adds: “It is in the process of restructuring its portfolio, selling off low returning assets and investing more in those which have higher growth opportunities. Initially this will result in a smaller and leaner operation, with production set to fall in the near term, however this is being sacrificed for the longer term prospects. We recommend the stock as a ‘buy’ for investors willing to take on an intermediate level of risk while looking for capital growth and some income.”

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