Funny how things can change so fast, isn’t it? This time last year, BP was making $3.96 per share in profits and paying out $2.34 in dividends for a payout ratio of 59%. When I first started writing about BP, I mentioned that the principal risk for shareholders involved the following conditions occurring at the same time (or near in time to each other): adverse legal judgments from the Gulf oil spill, a substantial decline in oil prices, and trouble securing income from the Rosneft project that accounts for nearly 20% of BP’s income. I mentioned those two last risks in passing—as almost a throwaway line—and unfortunately for BP shareholders, that trifecta of events occurred simultaneously to cause profits to fall substantially.
Profits of $4 and $5 per share in 2011 and 2012 have given way to expected profits of $2.25 per share in 2015. That assumes oil prices around … Read the rest of this article!