BP Reports Strong Earnings And The First Payout Increase Since Reinstating Its Dividend

Feb. 7.12 | About: BP p.l.c. (BP)

On Tuesday, February 7,2012, BP Plc (NYSE:BP), Europe's second-largest oil company, reported strong earnings and raised its dividend, largely on the strength of higher petroleum prices.

BP reported fourth-quarter earnings, excluding one-time items and inventory changes, of $5 billion, compared to $4.36 billion for the same quarter last year. These earnings results are about $100 million above average Wall Street expectations.

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The company also announced that it will increase the dividend payout by 14 percent. This is the first dividend increase for BP since the company resumed its temporarily suspended dividend about one year ago. BP suspended its dividend after the Macondo drilling catastrophe caused the worst offshore oil spill in U.S. history. The company paid no dividends in the second half of 2010, and when it reinstated the dividend in 2011, it was 50 percent below its prior rate.

BP also commented that it expects net cash flow to continue to increase, provided oil prices remain at around $100 per barrel or above. Nonetheless, BP also indicated that it anticipates its production to be "broadly flat" this year. Though the company is increasing its investments towards future production, BP also intends on selling oil producing assets valued at as much as $38 billion by the end of 2013.

The trial against BP over damages associated with the Macondo spill is scheduled to begin at the end of the month, on February 27, 2012. The trial is designed to determine the liability of companies including BP, Halliburton (NYSE:HAL) and Transocean (NYSE:RIG), and the extent of damages that each may be required to pay for its apportioned rate of fault for the disaster, if any.

A settlement is still possible in advance of the trial start, or even afterwards. BP has already reached agreements with related partners including Anadarko Petroleum (NYSE:APC) and Cameron International (NYSE:CAM), the maker of the blowout prevention hardware used on the well.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.