Oil and gas giant BP raised its dividend to investors and pledged to double its asset sales to £6.2million as it unveiled better-than-expected performance in its third quarter yesterday.
The fifth-largest investor-controlled oil and gas group raised its quarterly dividend by 5.6% to 9.5 cents a share and said it would sell the extra assets before the end of next year, returning most of the proceeds to shareholders.
The new sales target was in addition to those previously promised under a programme aimed at flogging £1.2billion to £1.9billion worth of assets per year until 2020.
Neill Morton, an analyst with Investec, said BP had “obliged” investor demand and noted: “The stock market doesn’t want the oil majors to spend money. Instead, investors want their cash back.”
But Garry White, the chief investment correspondent for broker Charles Stanley, warned that, along with other FSTE100 companies, particularly in the pharmaceuticals sector, BP could risk future investment.
He said: “Shareholders like them for the income but they get to the point where they are eating themselves and giving themselves away. They need to grow and they need future prospects and that is a big problem with BP.”
BP has already sold £23.7billion of assets – mainly to pay for the 2010 Gulf of Mexico oil spill.
The FTSE-100 company’s underlying profit for the third quarter of 2013 was £2.3billion compared with forecasts of £2billion.
BP declined to indicate what assets it may sell.
But there was some speculation it could consider its 20% in Roseneft, the state-controlled company into which BP folded its Russian business last year, which delivered £503million of profits in the quarter.
One source said: “There’s a lot of money to be made from a 20% stake in a company they have virtually no control over.”
Barry Shepherd, investment manager at Brewin Dolphin’s Aberdeen office, said: “They have historically divested assets as they develop more logical owners.”
The asset sales would also bring BP in line with a number of oil companies that have been making hints about the need for more “active portfolio management” as the sector faces rising costs and potential lower oil prices.
BP also raised slightly its overall cumulative charge for the costs of clean-up, fines, and compensation for the Macondo accident. The company now expects to pay out £26.5billion, up £62million due to small extra provisions.
BP shares hit a three-month high rising 5.4% to £4.77 .