Oil prices have bounced back to hover above $40, but oil is still down for the year. And the outlook isn’t optimistic for a recovery. Shares of BP (BP) remain below $35 and could dip below $30 if oil prices resume their descent. But will market conditions eventually lead BP to reduce its dividend payout?
Debt burden rises
When it comes to the company’s debt burden, it’s no surprise to see it went up in the past few quarter and is now at its highest levels in recent years, as you can see in the chart below. And if oil prices were to remain this low for a while, the company may have to acknowledge additional non cash impairments to its assets – a move that will further intensify its debt burden. But BP’s debt burden isn’t too high relative to some other oil producers: Total (TOT) has a debt-to-equity ratio of 0.58. But the bigger oil producers have lower ratios: Chevron (CVX) has a ratio of 0.2.
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For more please see:
- A couple of notes on the oil market
- Is Chesapeake walking towards the right path?
- Will BP make a Comeback?
- Will Oil Rise?
Disclaimer: The author holds a long position on BP plc. He does not plan to change his position within 120 hours of the posting of this article. This article is to be used for educational, research and informational purposes only and does not constitute investment advice. There are no guarantees, expressed or implied, of future positive returns in regards to the subject matter contained herein. Understand the risks inherent in investing before making the decision to invest or consult an investment professional for more information. Reasonable due diligence has been performed in regards to the information in this article. However, the author expressly disclaims any liability for accidental omissions of information or errors in fact.