BP Boosts Dividend After Earnings Despite Looming Gulf Oil Spill Litigation

Published on Tuesday, 07 February 2012 14:12 Written by J Hawk

New York, February 7^th (TradersHuddle.com) – London, England based BP P.L.C. (NYSE: BP) released earnings results earlier today that showed a return to solid profits for one of the world’s largest international oil and gas companies after its revenues took a severe beating in 2010 due to its involvement in the Gulf Oil Spill disaster. 

BP reported a profit of $7.685 billion in the last quarter of 2011 that concluded on December 31^st.  The result was 38 percent higher than the $5.567 billion gain reported for the same period of 2010. In response, the company announced a 14% increase in its quarterly dividend to 8 cents per share.

On balance, the stock market responded mildly to British Petroleum’s latest earnings news by taking its ADRs slightly lower in more active than usual trading of 6.4 million shares on the New York Stock Exchange. After the announcement, BP’s ADRs were marked initially softer by the U.S. market, but then recovered to trade at $46.39 as of this writing, showing a modest loss of -1.02% on the day or -$0.4802

BP’s Replacement Cost Profits Grow 14 Percent

The petroleum firm’s replacement cost profits — a closely watched earnings result for the industry — came in at $7.606 billion, which rose by a respectable amount compared with its $4.614 billion result seen in the fourth quarter of 2010.

For the entire 2011 year, this same measure came in at $23.90 billion that compared favorably with the loss of $4.914 billion seen in 2010 that was largely attributed to costs of funding the cleanup and paying liability claims related to the Gulf Oil Spill.

BP Received Substantial Settlements from Deepwater Horizon Partners

BP’s fourth quarter results also included the fact that the company had received a pre-tax $4 billion settlement during the period from Andarko Petroleum (NYSE: APC) to cover Andarko’s liability for the Gulf Oil Spill accident. Cameron International Corporation also paid BP $3.7 billion in Q4 2011 to cover its involvement in the disaster.

BP, Anadarko Petroleum and Cameron International (NYSE: CAM) were partners in the tragic Deepwater Horizon Oil Spill in the Gulf of Mexico that began on April 20^th of 2010. The largest accidental oil spill in history was caused by a deadly explosion at a deep sea oil rig that allowed almost 5 million barrels of oil to gush into the Gulf of Mexico until it was eventually capped on July 15^thof that year.

Despite the looming litigation about this catastrophe due to open in the New Orleans courts on February 27^th, BP Group CEO Bob Dudley sounded optimistic about his firm’s future, stating, “2012 will be a year of increasing investment and milestones as we build on the foundations laid last year. As we move through 2013 and 2014, we expect financial momentum will build as we complete payments into the Gulf of Mexico Trust Fund, restore high-value production and bring new projects on stream.”

The Technical Picture for BP Seems Cautiously Bullish Near Term

From a technical perspective, BP’s ADR share price has shown a medium term upwards trend after sinking to a notable low at the $33.62 level on October 4^th of 2011.

The ADRs have since recovered considerably, initially being rebuffed off the $45.84 level to trade as low as $39.41, only to subsequently break that resistance level to head to a recent high at the $46.91 level seen on February 6^th, just one day prior to the release of BP’s latest earnings report.

Although the near term trend has been higher over the past few months, the upside could be limited since considerable resistance appears on the charts just over the $47 level, with multiple peaks noted during the past year at $47.04, $47.09 and $47.14. Beyond that, resistance is noted at $49.09 and $49.50.  A break above $49.50 on substantial trading volume would be quite bullish for the ADRs.

Support for BP ADRs shows initially at the $46.10, $45.11, $42.84 and $42.25 levels, and then below that at $40.40, $39.41 and $33.62.