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BP admitted today that it is paying out more in shareholder dividends than it is actually earning after a massive 60% crash in profits.
The dive in the oil price — BP sold at an average of $41 in the first quarter of 2009 against $91 a year ago — sent BP profits plunging in the first three months of the year to $2.58 billion from $6.23 billion in the same period in 2008.
The City has been expecting BP profits to crash this year and questions have been raised over whether the BP dividend — not cut since the 1992 oil crisis — is sustainable.
BP said today it is holding its dividend at 84 cents per US share, the same as its 2008 fourth quarter payment.
That means the quarterly shareholder payout will total $2.61 billion or more than 101% of earnings.
Big Oil is suffering not only from its commitments to shareholder payouts, but big capital expenditure plans and high costs from the last few years of the oil price boom at a time of plunging revenues.
While BP has increased its production rates to more than 4 million barrels of oil a day for the first time in three years, it also reported its net debt has leapt to $26.7 billion from $25 billion at the turn of the year.
Chief executive Tony Hayward said: “These are a strong set of results reflecting our ability to deliver in a tough climate of a dramatically lower oil price and a weaker trading environment.
“The external environment remains very challenging. Oil prices are expected to remain low and our customers are facing tough business conditions. We need rapidly to bring our costs to a level that is compatible with a $50 a barrel world.”
The growth in production came as its much-delayed giant Thunder Horse installation in the Gulf of Mexico hit 300,000 barrels a day.
