After an initial rise, shares in FTSE 100 oiler BP (LSE: BP) were trading flat earlier this morning. That’s despite a generally solid set of first-quarter figures from the £112bn-cap.
Underlying replacement cost profit — the company’s preferred reporting measure — came in at $2.4bn. That’s less than the $2.6bn achieved at the same point last year but this was attributed to the “weaker price and margin environment” seen at the beginning of 2019. Positively, it’s actually better than some analysts predicted.
Oil and gas production averaged 3.8m barrels a day of oil equivalent over Q1 — 2% more than last year due to the integration of recent acquisitions from mining giant BHP Group and three major projects in Trinidad, Egypt and the Gulf of Mexico.
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Speaking of the latter, BP paid out $600m on claims relating to the 2010 disaster over the period but still managed to generate operating cash flow of $5.9bn.
Commenting on today’s numbers, CEO Bob Dudley said the company’s performance over the quarter demonstrated “the strength of its strategy” and that today’s “resilient” results had been achieved during a “volatile period.”
For many investors, however, quarterly figures aren’t anything to get too worked up about.
That’s because BP is understandably regarded as a dividend-generating machine by most holders. For this reason, a 2.5% hike to the quarterly dividend — to 10.25 cents per share — will be the most important thing to take away from today’s update.
Assuming the same happens over the next three quarters, this leaves BP returning 41 cents per share in 2019, equating to a dividend yield of 5.7% at today’s share price.
And although nothing can be guaranteed (particularly anything connected to the oil and gas industry), this payout looks secure for now.
As part of a fully diversified portfolio focused on generating income, BP — like Royal Dutch Shell — still has a lot going for it.
For the brave
Of course, dividends aren’t important for many investors, especially those lucky enough to have several decades in the stock market ahead of them.
For capital gains, I think there’s a far better alternative in the form of fractured basement explorer and producer Hurricane Energy (LSE: HUR).
The £900m-cap is currently focused on generating oil from its potentially highly lucrative Lancaster field.
That said, news on the spudding of the first of three wells in its Greater Warwick Area earlier this month shows the company is content to have more than one plate spinning at a time.
Unfortunately, this recent activity has failed to move Hurricane’s share price and it continues to consolidate between the 45p-50p range.
Nevertheless, confirmation of success at the former will surely see buyers flood back in, especially when the market gets a better idea of the volume of oil we’re talking about.
Further developments at Warwick could compound these gains. There’s even talk that this area might be just as valuable to the company, if not more so, than Lancaster.
To be clear, Hurricane is a world away in terms of risk compared to BP. While the methods adopted by the firm have been employed successfully elsewhere in the world, it’s the first time they’re being used in UK waters. A lot can, and might, still go wrong.
I’m in for the ride with fingers and toes firmly crossed.
