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Given its heavy investment in green projects and debt reduction, analysts believe BP will struggle to match Shell’s large dividend increase.

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1 August 2021

Analysts say BP will struggle to match Shell’s big dividend increase due to spending on green projects and debt reduction.

Last week, BP’s Anglo-Dutch rival announced plans to return $2 billion (£1.4 billion) to shareholders after the oil price recovered. Total (France) and Chevron (USA) also announced big buybacks.

Experts say investors expecting BP to follow suit will be disappointed this week when it reports second-quarter results. Analysts expect a repeat of the first quarter’s 5.25 cent per share dividend, worth $1.1 billion and yielding 6.7% annually. According to Susannah Streeter of Hargreaves Lansdown, BP’s dividend will “stay cautious due to the financial challenge posed by the green transition.”

Bernard Looney, BP’s new CEO, announced plans to reduce emissions to zero by 2030.

BP’s new CEO, Bernard Looney, announced plans to reduce emissions to zero by 2030. Spending on low-carbon projects was increased from $500 million in 2019 to $5 billion by 2030, while oil and gas production was reduced by 40%.

BP has made a number of green investments, including £900 million with EnBW on offshore wind projects in the Irish Sea. Looney has also reduced the company’s debt to $35 billion.

But the move has enraged some investors, including thousands of pensioners who rely on oil dividends. Fund managers fear BP is sitting on worthless oilfields. The stock has dropped 37% since Looney’s arrival, closing at £2.89 on Friday.

Before the pandemic, BP and Shell were dubbed ‘cash machines’ by the City for their huge regular payouts Due to global Covid lockdowns, fuel demand fell last year, and the oil price fell.

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