Shares digital

BP (BP.) – Finals PTP: £15,744.9m (£17,644.8m) Divi: 6.81p (5.26p)

On the surface these seemed an extremely disappointing set of results with profits down 22%, while overall the numbers either missed or at the bottom end of market expectations. The difficulties at the oil giant’s US refineries the key factor in making 2007 a year to forget. Yet there were some shards of light that seem to have been acknowledged by investors. The 31% hike in the dividend, marking a shift in strategy from the wave of share buybacks the oil giant had previously embarked upon, has left the company on an attractive yield of 5.1%. It also suggests an understanding of the need to reward shareholders more directly and, according to management, represents their bullish assessment of the company’s long-term prospects. In response the stock was up against a falling market and is currently hovering above 540p.

The restructuring promised by Tony Hayward also seems to be gathering steam with at least 5,000 job cuts being announced and more aggressive strategy can perhaps be anticipated given that the oil giant has increased its long-term oil price assumption from $40 to $60.

Another positive is that the company has kept its reverse replenishment rate at more than 100% in contrast to Royal Dutch Shell which has deferred any update on its reserves until the spring.

Seymour Pierce analyst Peter Hitchens, makes a direct comparison between the two. He says: ‘We believe that BP has reached a low point and hereon it will reverse some of the underperformance relative to Royal Dutch Shell over the course of the year. BP outperformed the All Share by 7% over 2007 compared to 14% from Royal Dutch Shell.’

Shares says: Focus on the restructuring rather than the disappointing numbers.

by: Tom Sieber