INVESTORS will urge oil giant BP this week to spell out what plans it has to return cash from its recent Russian deal.
Market analysts say the sale process is progressing well but that it is too early to expect any confirmation of a mooted special dividend.
BP boss Bob Dudley last week announced that it had sold its stake in the TNK-BP joint venture to Russian state-owned company Rosneft in a cash and shares deal worth £16.7 billion.
The British company unveils third quarter figures this week that should hint at an improvement in its production business.
The figures will show that extraordinary margins are being achieved in its refining business that are offsetting a sluggish performance from oil production.
While rival Shell is forecast to post bigger third quarter profits off the back of high oil prices, BP has more to gain from an unexpected bonanza being enjoyed by refining, the industry’s poor relation.
A tightening in supply and cheaper input prices in the US has seen companies reporting bumper profits at their usually less glamorous refining or “downstream” divisions.
Ian Armstrong, an oil analyst at Brewin Dolphin, said BP has a better chance of beating City expectations than Shell. “You would think Shell might fare better because of the extraordinary refining margins across the globe, but several of its refineries have been shut for maintenance,” he said. BP, on the other hand, has been operating at full strength, although it recently sold some of its refineries as part of the disposal programme aimed at covering the cost of the 2010 Deepwater Horizon disaster.
The recent sale of the Carlson and Texas City refineries bring the total raised by BP to about $35 billion (£22bn) since 2010, meaning the process is close to completion.
The divestment programme has left BP a smaller company, and that will be reflected in its figures on Tuesday. But sources within the company suggest the long awaited turnaround may be in sight, with production picking up in the current quarter after more than two years of decline following the Gulf of Mexico incident.
BP is forecast to report underlying replacement cost profit of around $4.1bn, a 25 per cent drop on the same quarter last year.
Analyst Tony Shepard, at Charles Stanley, said the strong downstream performance should make for better earnings than the previous quarter. But he said production would be slightly lower, as facilities coming back on stream in the Gulf of Mexico would be offset by stoppages in the North Sea.
Shell will give its update on Thursday and is expected to report third quarter profits of $6.3bn, up 10 per cent on the previous quarter but down a tenth on the same quarter last year. Shepard said the Anglo-Dutch firm would likely use its third quarter results to write down bid costs for Cove Energy and may also take a charge for US shale gas assets.