Bosses at BP will unveil the oil giant’s first annual loss in nearly two decades tomorrow following a disastrous year for the blue-chip company.
But analysts and investors are hopeful chief executive Bob Dudley will resume dividend payments – after their suspension over the summer – in a signal that the British firm is recovering from last year’s Gulf of Mexico oil spill.
BP is expected to report a loss of at least $4.5bn (€3.3bn) in its full-year results, after the tens of billions it set aside to cover costs of the Deepwater Horizon disaster are deducted.
The return of BP’s dividend would be a key development for pension holders as well as investors given the stock previously accounted for an estimated one in every six pension pounds invested.
The quarterly dividend is expected to be around seven cents a share – half the level announced in April.
BP upped its bill estimate to cover the cost of the oil spill to $40bn (€29bn) in November, but analysts do not expect this to increase and have latched on to recent signs that only half of the $20bn (€14.6bn) compensation fund will be required.
The financial hit from the oil spill will offset underlying replacement cost profits of $21bn (€15bn) for the full year. Profits for the fourth quarter are expected to be around $4.9bn (€3.6bn).
BP has managed to claw back around $20bn (€14.6bn) through asset disposals – by selling interests in Argentina, North America, Egypt, Venezuela, Vietnam and Colombia.
The company has been able to benefit from a gradual increase in oil prices over 2010, which hit $90 (€65) a barrel at around the year end.
But production is likely to be 10% lower than a year earlier due to the impact of the US drilling moratorium and asset disposals following the disaster, while extended maintenance periods will also impact output.
As well as the restoration of the dividend, the City will be looking for an update on the company’s strategic overhaul.
In the words of new chief executive Mr Dudley, the firm is on a “journey to re-establish trust in BP around the world – especially the US”.
It suffered a public relations disaster after the explosion on the Deepwater Horizon rig last April which killed 11 people and dumped millions of gallons of oil into the Gulf of Mexico.
Mr Dudley is understood to be considering scrapping BP’s production targets in favour of smaller, more exploration-focused operations.
But from an investors’ perspective, the company has started the year relatively well.
The market gave a warm welcome earlier this month to BP’s £10b (€7.3bn)n deal with Russian oil giant Rosneft to form an Arctic exploration alliance.
The deal gave shares a boost, which after falling from a high of 655p in April to a low of 303p in June have steadily climbed back to 483.7p.
Analysts expect the Russian deal will help the company recoup some of the losses incurred from asset disposals.
However, BP is embroiled in a legal tussle with shareholders at TNK-BP, another Russian joint venture, who argue the new deal breaches its shareholder agreement. The dispute will be brought to court in London tomorrow.
Richard Hunter, head of UK equities at Hargreaves Lansdown Stockbrokers, said: “The share price has already rebounded from its 2010 lows, and at the moment the emergency fund appears to be adequately sufficient to counter future claims.
“There is a further cost, however, in building this fund – asset disposals have been made which reduce BP’s capacity in the shorter term. However, some of this could be regained if the proposed deal with Rosneft of Russia progresses.
“In addition, there are strong hopes that the new chief executive will use the results to announce the resumption of the dividend, albeit at a lower rate than before.”
He added: “The recent strength in the oil price should prove a tailwind for profits, such that overall the general market voice remains unaltered on BP - the shares are a buy.”
BP last reported an annual loss in 1992, when low oil prices, recession and strategic errors saw chief executive Bob Horton lose his job. The firm lost £458m that year.