BP: Berenberg still on 'hold' after provisions
(CercleFinance.com) - Berenberg maintains its "hold" recommendation on the BP share, believing that the heavy provisions announced by the British energy giant could result in it cutting its dividend.
While the write-downs unveiled by the oil group this morning will have no effect on its cash flow, they do affect its gearing (debt-to-equity ratio), which was already high, the analyst says.
According to the broker, 15 billion in provisions for depreciation would raise the debt/equity ratio beyond the 40% threshold, all other things being equal.
In order to give itself more financial leeway, BP could be tempted to follow the example of its peer Shell and reduce its dividend "significantly", a decision that could take place as soon as Q2 results are presented, according to Berenberg, which maintains its target price of 320 pence for the share.
As a reminder, BP announced this morning that it would book impairment charges of 13-17.5 billion dollars in the second quarter.
These provisions are based on the scenario of a barrel of Brent averaging around 55 dollars over the long term, 31% less than its previous forecast.
Copyright (c) 2020 CercleFinance.com. All rights reserved.
The information and analyses distributed by Cercle Finance are only intended as decision-making support for investors. Cercle Finance's responsibility may not be entailed, either directly or indirectly following the use of such information and analyses by readers. Any non-professional investor is recommended to consult a professional advisor before making any investment decision. This indicative information in no way constitutes any invitation to sell or buy securities.
While the write-downs unveiled by the oil group this morning will have no effect on its cash flow, they do affect its gearing (debt-to-equity ratio), which was already high, the analyst says.
According to the broker, 15 billion in provisions for depreciation would raise the debt/equity ratio beyond the 40% threshold, all other things being equal.
In order to give itself more financial leeway, BP could be tempted to follow the example of its peer Shell and reduce its dividend "significantly", a decision that could take place as soon as Q2 results are presented, according to Berenberg, which maintains its target price of 320 pence for the share.
As a reminder, BP announced this morning that it would book impairment charges of 13-17.5 billion dollars in the second quarter.
These provisions are based on the scenario of a barrel of Brent averaging around 55 dollars over the long term, 31% less than its previous forecast.
Copyright (c) 2020 CercleFinance.com. All rights reserved.
The information and analyses distributed by Cercle Finance are only intended as decision-making support for investors. Cercle Finance's responsibility may not be entailed, either directly or indirectly following the use of such information and analyses by readers. Any non-professional investor is recommended to consult a professional advisor before making any investment decision. This indicative information in no way constitutes any invitation to sell or buy securities.