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British Petroleum shares see a lift after positive earnings and capital share moves provide a lift to the stock.
British Petroleum (BP) showed a gain of $2.6 billion in the second quarter, even after it paid out $1.2 billion to the US Department of Justice in connection with the Deepwater Horizon oil spill in the Gulf of Mexico in 2011. While BP has accrued costs relating to this oil spill, for which it has paid significant payments for, additional risk is present for future payments and this has served as a drag on the stock price for the past seven years. In total, sixty five billion of costs have been incurred in connection with this oil spill.
British Petroleum does have a significant amount of debt that has increased to about forty billion this quarter, namely as a result of debt in connection with Deep Horizon. BP does have strong cash flows to cover this debt, with cash flow of operations of $5.4 billion for the first quarter alone. The debt level has been a significant backdrop for the company and will hinder operations and growth for the next few years, as compared to their oil peers.
British petroleum also hinted at the possibility of a dividend increase in 2018. This would be the first of an increase for the company since 2014. British petroleum, is currently benefiting from increasing oil prices after a long term oil glut kept oil prices down for many years. A dividend increase, would be dependent on oil prices staying up or increasing over the rest of the year. Most market observers believe that current oil prices are at a more reasonable then the deflated values from the past few years.
British Petroleum stock immediately increased after this announcement by about three percent and showed renewed optimism in the company and industry, which has been an underachiever as compared to the rest of the stock market for several years running.
BP is the second largest oil company in Europe and one of the largest in the world, with the largest publicly owned being Exxon Mobil.