Aker BP Cuts Dividends Despite Earnings Bump

Aker BP has cut its dividend payments by two thirds, it said as it announced its quarterly results May 6, citing the Covid-19 crisis and the resulting collapse in oil prices. "The board has decided to retract the current dividend plan in order to retain financial flexibility and position the company for future value accretive organic and inorganic growth opportunities," Aker BP said.

In terms of operational performance, Aker BP described the quarter as its best yet. Production reached a record 208,100 barrels of oil equivalent/day, up from 158,700 boe/d a year earlier, while costs fell to $8.7/boe, from $13.4/boe. Aker BP has a 11.6% stake in the giant, low-cost, Equinor-operated Johan Sverdrup oil project, which came on stream in October and whose output is on track to reach 470,000 b/d this month. 

The Norwegian producer was therefore able to post a 24% year-on-year growth in core earnings (Ebitda) to $666mn in the three-month period, it said. However, it also booked $277mn in depreciation and $654mn in impairment charges, resulting in a net loss of $335mn, versus a $10mn profit a year earlier. It is targeting a full-year output of 205,000-220,000 boe/d.

It will distribute only $70.8mn in quarterly dividends in May, a third of the previous amount it pledged, and will maintain dividends at the lower level for the rest of 2020, resulting in full-year payments of $425mn. It had initially promised $850mn in dividends in 2020. Earlier Aker BP was planning to reward shareholders with a $100mn increase in dividends each year until 2023. 

"Each quarterly dividend decision will however be subject to a holistic assessment of all relevant factors, including oil prices, the Covid-19 situation and the company's financial position," Aker BP said. "The company will revert with a new long-term dividend policy when market conditions allow," it said.

Aker BP is owned by Norway's Aker (40%) and BP (30%). Equinor and Lundin Energy have also announced steep cuts to dividends, in light of market conditions.