BP's results please but Hargreaves Lansdown warns of uncertainty ahead

BP is broadly rated by the market consensus at a ‘buy’ after results beat forecasts on Tuesday, though Hargreaves Lansdown Stockbrokers warned investors not to be complacent if crude prices remain at depressed levels.

“Set against headwinds which would have blown lesser forces off course, BP has continued its steady, if treacherous, recovery,” said Richard Hunter, head of equities at Hargreaves.

The stock was up 2% by 446.3p by 10:00 after the firm reported an underlying replacement cost profit of $2.2bn, down from $2.8bn the year before but well above analysts' forecasts of a bigger drop to $1.7bn.

BP also announced plans to cut its investment budget for 2015 by $4bn-6bn to $20bn, following in the footsteps of its other rivals in response to the collapse in crude.

“Capital conservation is becoming a central theme, helped along by a reduction in project expenditure, a focus on costs, further divestments and a reduction in net debt,” Hunter said.

The company maintained its fourth-quarter dividend payment at 10 cents per share, which Hunter attributed to its “unerring ability to generate cash”. He said that BP’s dividend yield of 5.3% is still a key attraction for income-seeking investors.

“Less positively, the current oil price, if it is to remain at these levels, will eventually pile further pressure on the sector in general, and it remains to be seen whether dividend payments will at some point need consideration.

“BP’s Russian exposure is a further drag on prospects, whilst the fallout from the Gulf of Mexico spill has yet to be finalised once and for all.”

While the shares have fallen 8% over the past year, compared with a 4% rise for the FTSE 100, Hunter said the company has shown it is “fighting hard to maintain its position, and the market consensus of the stock as a buy may well be consolidated as a result”.