BP reported its Q1 earnings on April 28, 2015 (wow, I'm late on this update). The main highlights of the quarter were the increase in downstream profits and drastic decrease in upstream profits, which was related to the volatile drop in oil prices during Q1. Oil prices have rebounded somewhat since; however, they are still down drastically from the $80 - $100 prices during the previous status quo.
The drop in oil prices greatly reduced BP's profits. However, management has reiterated their commitment to maintaining the dividend, even in this lower oil price environment. Several opportunities to maintain the dividend, as per management, include reducing exploration expenditure, continuing with the remaining $3 billion in planned asset divestitures, and increasing "gearing" or debt (currently at 18.4% with a management-specified cap at 20.0%).
Recently, an announcement was released that stated BP has come to an agreement to settle the claim with the United States government related to the Deepwater Horizon oil spill . The settlement totaled $18.7 billion, which will be spread out over 15 - 18 years. Numerous individual claims against BP have yet to be settled; however, the deadline for filing claims has passed. Both of these developments clarify BP's exposure to the spill and will allow investors to ease their concerns about the maximum reduction in BP's profits related to the spill litigation.
Common Cents Take: BP is yet another step closer to putting the spill behind it. The drop in oil prices has hurt BP profits; however, BP has multiple available options to create cash to maintain the dividend during this period. Being that Common Cents has invested in BP primarily for the dividend, Common Cents continues to view BP as an attractive Buy. Going forward, Common Cents would like to purchase more shares when the dividend yields around 6% and at every .5% dividend increment above %6.
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