Oil Giant Triumphs in the Face of Near-Shattering Defeat
Big oil companies have had a tough time this earnings season.
For the second quarter in a row, both ExxonMobil (XOM) and Royal Dutch Shell (RDS-A) have reported substantially lower earnings, blaming lower gas prices and exorbitant costs of mega-projects across the globe, Investment Director Karim Rahemtulla recently reported.
Even Chevron (CVX) issued profit warnings in January, warning shareholders of less than spectacular profit.
The Bigger They Are, The Harder They Fall
But BP (BP) is in a slightly worse position than other mega-oil companies. The company reported a 37% plunge in fourth-quarter profit, blaming refining weaknesses and subsequently selling two major refineries in the United States last year.
As if these present-term shortcomings weren’t enough, BP is also still dealing with fallout from the 2010 oil spill that killed 11 people and became the worst offshore environmental disaster the United States has ever seen.
And as hard as BP tries to move its story forward, the past is still inevitably haunting the company. While criminal charges have been settled for the 2010 oil spill disaster, there are still substantial fines to contend with.
Since the disaster, BP has sold off large parts of its business – amounting to $40 billion in assets – to offset the $42.7 billion of cleanup, legal proceedings, fines and compensation from the spill. BP’s army of lawyers is attempting to push the remainder of spill fines into the future to spread any additional payouts thin.
To further complicate the oil giant’s future, the company is still facing a civil case. If convicted under the Clean Water Act, it could be facing an additional $18 billion in fines.
There’s been immense tragedy in BP’s past, but there has been an equally sizable effort spent on building a strong future.
The company isn’t out of the woods yet, but the confidence BP management is exuding is noteworthy. And the shareholders are reaping the benefits.
Pampering the Hand That Feeds You
At the insistence of CEO Bob Dudley three years ago, dividends began returning to shareholders. The inclusion of these dividends was meant to encourage investors – and BP’s actions have spoken much louder than any words.
BP has raised its quarterly dividend three times – a 30% increase since 2011 dividend reinstatement…That’s an average of 14.23% per year!
And last October, BP announced it would sell $10 billion in assets in 2014-2015 and return most of it to shareholders.
In essence, “Beyond Petroleum” is going back to basics. An oil giant nurturing strong relationships with shareholders seems old school… but it’s working.
BP has diligently carved a path out of the wreckage of the past few years to ensure a brighter future for shareholders.
Considering shares lost two-thirds of their value after the spill, BP’s recent recalibration and how it has handled this crisis may warrant a closer look for investors. Recovering from disaster is never a quick process, so looking to BP as a long-term play could have potential.