News
BP's Earnings Overshadowed By Russian Dispute
Mon, 01/31/2011 - 9:20am
LONDON (AP) -- Oil company BP PLC is expected to outline growth plans and provide an update on the cost of the Gulf of Mexico oil spill when it releases fourth quarter earnings on Tuesday. But anticipated strong profits and a likely restoration of the company's dividend are being overshadowed by a rumbling dispute at BP's Russian subsidiary.
WHAT TO WATCH FOR: Investors and analysts are eagerly anticipating an announcement from Chief Executive Bob Dudley about BP's dividend to shareholders. The company scrapped the payment for the first three quarters of the year to free up cash for spill costs following political and public pressure.
Dudley is also expected to provide an update on the costs associated with the devastating Gulf spill. The company has already set aside $39.9 billion and has raised around $21 billion from asset sales, but it still faces a raft of lawsuits and fines in the United States.
Analysts are also keen to tune in to a scheduled two-hour presentation on strategy from Dudley after the earnings are announced. The company has indicated it plans to become a smaller business, focused on exploration and production -- analysts want more detail on those plans.
However, a dispute with BP's Russian partners in its TNK-BP venture following BP's share swap deal announced earlier this month with Russia's Rosneft to explore the Arctic seabed is casting a long shadow. The Rosneft deal hedges BP's production options as it faces new restrictions in the United States, but Russian investors claim it violates exclusivity provisions in the TNK-BP shareholder agreement and will erode the joint venture's competitive advantage.
BP's Russian partners in the AAR consortium, which owns the other half of the venture, have sought a ruling from London's High Court to suspend the deal, leaving TNK-BP to remain the primary vehicle of BP's operations in Russia and the Ukraine. A High Court hearing on the matter is due to take place on Tuesday.
AAR upped the ante on Monday by voting against a $1.8 billion dividend payout for the fourth quarter, a move that may impede BP's ability to increase its own dividend payments. The 50 percent holding in TNK accounts for about a quarter of BP's output and a fifth of reserves. U.S. politicians, meanwhile, have warned about national security risks.
BY THE NUMBERS: BP is expected to post earnings of around $4.9 billion for the fourth quarter, up 11 percent from a year ago, on the back of higher crude oil prices. Analysts have pegged a reinstated payment of around 6-10 cents per share.
WHAT'S AHEAD: The TNK-BP dispute is complicating BP's rebound from the Gulf spill. The company has indicated the issue may go to arbitration, which could take months. There's also still a long way to go on the spill fallout with final costs from future legal action yet to be determined.
STOCK PERFORMANCE: BP's stock was trading at around 486.4 pence ($7.74) on Monday. That's a 26 percent drop from April 20, the day of the Macondo well explosion, but it is well off a low of 302.9 pence reached in late June.
ANALYST TAKE: Evolution analysts said the "key question is whether BP decides to set an agenda for the rest of the international oil companies by having a radical shake up ... but the Rosneft share swap has already created tension with TNK-BP and politicians in the U.S. We suspect BP may move more slowly in light of the ongoing Macondo investigations and the political scrutiny it remains under."
WHAT TO WATCH FOR: Investors and analysts are eagerly anticipating an announcement from Chief Executive Bob Dudley about BP's dividend to shareholders. The company scrapped the payment for the first three quarters of the year to free up cash for spill costs following political and public pressure.
Dudley is also expected to provide an update on the costs associated with the devastating Gulf spill. The company has already set aside $39.9 billion and has raised around $21 billion from asset sales, but it still faces a raft of lawsuits and fines in the United States.
Analysts are also keen to tune in to a scheduled two-hour presentation on strategy from Dudley after the earnings are announced. The company has indicated it plans to become a smaller business, focused on exploration and production -- analysts want more detail on those plans.
However, a dispute with BP's Russian partners in its TNK-BP venture following BP's share swap deal announced earlier this month with Russia's Rosneft to explore the Arctic seabed is casting a long shadow. The Rosneft deal hedges BP's production options as it faces new restrictions in the United States, but Russian investors claim it violates exclusivity provisions in the TNK-BP shareholder agreement and will erode the joint venture's competitive advantage.
BP's Russian partners in the AAR consortium, which owns the other half of the venture, have sought a ruling from London's High Court to suspend the deal, leaving TNK-BP to remain the primary vehicle of BP's operations in Russia and the Ukraine. A High Court hearing on the matter is due to take place on Tuesday.
AAR upped the ante on Monday by voting against a $1.8 billion dividend payout for the fourth quarter, a move that may impede BP's ability to increase its own dividend payments. The 50 percent holding in TNK accounts for about a quarter of BP's output and a fifth of reserves. U.S. politicians, meanwhile, have warned about national security risks.
BY THE NUMBERS: BP is expected to post earnings of around $4.9 billion for the fourth quarter, up 11 percent from a year ago, on the back of higher crude oil prices. Analysts have pegged a reinstated payment of around 6-10 cents per share.
WHAT'S AHEAD: The TNK-BP dispute is complicating BP's rebound from the Gulf spill. The company has indicated the issue may go to arbitration, which could take months. There's also still a long way to go on the spill fallout with final costs from future legal action yet to be determined.
STOCK PERFORMANCE: BP's stock was trading at around 486.4 pence ($7.74) on Monday. That's a 26 percent drop from April 20, the day of the Macondo well explosion, but it is well off a low of 302.9 pence reached in late June.
ANALYST TAKE: Evolution analysts said the "key question is whether BP decides to set an agenda for the rest of the international oil companies by having a radical shake up ... but the Rosneft share swap has already created tension with TNK-BP and politicians in the U.S. We suspect BP may move more slowly in light of the ongoing Macondo investigations and the political scrutiny it remains under."
