With the recent BP oil debacle in the Gulf of Mexico, shares in BP have taken a decrease by as much as one third. New CEO Bob Dudley, to reinvigorate investors, has decided to halt dividend returns so that a larger supply of investment capital could be acquired. This is an attempt to open up cash flow so that BP could concentrate more on expanding. The idea is through a "ambitious program of growth"BP will be able to project better earnings in the future.
Investment-bank research has shown that major Western oil companies should consider shedding their mature assets,spend more on prospecting, and cut down on dividend returns to open up cash flow. To cut dividends is a dangerous task because shareholders feel that they are not sharing in the profits that they should rightfully be given. The other side of the table see that with cutting these returns there will be more money to invest in long-term profits.
This is a major shift in Big Oil investment. Specifically, Western oil companies have shifted their profit share to increase future exploring. Some regions that have been specified for this expansion are West Africa and the Gulf of Mexico. In these regions high-growth has been witnessed in the past three to four years. This change in investment by major oil corporations show, how even in a hostile unstable economic environment, there is a need to keep moving forward with ingenuity and innovation.
-Timothy D. Vallario
-Source: Wednesday, November 3, 2010 - VOL. CCLVI NO. 106, Marketplace B1"BP's Dividend Takes Back Seat"
I found this article very interesting. It was almost surprising that BP's shares have decreased by that much. I am not really sure what all this means for the economy but I think its interesting that big oil companies are still investing on future exploring. I don't really understand all the stuff about what this means for shareholders, but I think the most important part of this article is that major oil corporations are still moving forward to find new innovations, which I think is interesting, given the economy.
ReplyDelete-Rianna Das