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BP and Shell’s earnings provide key insights into the state of oil majors, a year after the oil price bottomed. Both have seen impressive rebounds in their share price, and the dividends now look much safer than a year ago. But they have different challenges.
BP has had six years of retrenchment, but now it is looking to open the floodgates of exploration and expenditure. Yet, with US supply ramping up, and a shift to electric vehicles looking more likely, it is not at all clear that a supply crunch will arrive any time soon. If BP gets too carried away, then it could find itself with extensive liabilities that it cannot match, and this would revive concerns about the dividend. Crucially, BP’s cash burn will only stop if oil hits $60. These are somewhat worrying times.
The share price has seen a significant pullback from the January highs at 520p. Nonetheless, it seems to have built a firm base at 450p, and, if it can close the gap from results day and recover 480p, a bottom will be in place and a move back to 500p and possibly to 520p will be on the cards.