View the article online at http://citywire.co.uk/money/article/a877550
FTSE dives as BP unveils worst loss in 20 years
FTSE 100 drops more than 150 points, with BP among the casualties after unveiling its biggest loss in 20 years.
Update: Shares in BP have weighed on the FTSE 100 after the oil major unveiled its worst loss in 20 years and announced plans for a new round of job cuts, but kept the dividend safe.
BP (BP) tumbled 8.9% to 334.5p, the biggest faller on the FTSE 100, which dropped 158 points, or 2.6%, to 5,902. The oil major reported an annual loss of $6.5 billion for 2015 against the backdrop of the tumbling oil price, worse even than the loss incurred in the year of the Gulf of Mexico oil spill.
BP also announced 3,000 cuts would be cut from its downstream unit by the end of 2017, on top of 4,000 job losses already announced from its oil and production division.
But it held the dividend, at 10 cents for the quarter. Following the slump in the shares, they now yield 8%.
'BP hasn't blinked on the dividend, but it is playing chicken with the oil price,' said Steve Clayton, head of equities at online stockbroker Hargreaves Lansdown.
'BP's dividend is a mile away from being covered by earnings and the market is saying that is unsustainable. They are a chasm away from their cash break-even oil price of around $60 per barrel.'
Miners were also in the red, amid continuing fears of slowing economic growth from top metals consumer China. BHP Billiton (BLT) fell 7.5% to 627.4p, Anglo American (AAL) dropped 9.5% to 247.9p and Rio Tinto (RIO) was down 6.1% at £15.92.
Sainsbury's and Home Retail have agreed on a deal of 0.321 Sainsbury's shares and 55p for each Home Retail share. Home Retail shareholders will also receive 25p per share as proceeds from the sale of the Homebase chain, and 2.8p in lieu of a final dividend for 2016.
The offer and proposed capital returns equate to a price of 161.3p per Home Retail shares, or 133.5p per share without the capital return.
Sainsbury's rose 2.3% to 250.2p on the news while Home Retail was flat at 153.2p following a strong surge yesterday as investors anticipated the announcement.
'The final price is actually below the 136p that has been suggested by some as Sainsbury's initial offer (but for the whole of the group, including Homebase), and it follows disappointing trading performance by Argos in recent weeks,' said James Grzinic, analyst at Jefferies.
'However, it also reflects the sale of Homebase to Bunnings, which materially simplifies the integration process for Sainsbury's.'
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Look up the shares
- BP PLC (BP.L)
- Royal Dutch Shell PLC (RDSb.L)
- BG Group PLC (BG.L)
- BHP Billiton PLC (BLT.L)
- Anglo American PLC (AAL.L)
- J Sainsbury PLC (SBRY.L)
- Home Retail Group PLC (HOME.L)
- Rio Tinto PLC (RIO.L)
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by Gavin Lumsden on Sep 30, 2016 at 17:23