The BP Issue The coming BP 'rights' issue of £60
million startled the market, but the Government declared its intention of exercising its rights—subject to the terms being satisfactory, which will not be known until the end of the month. As the Gov- ernment owns 51f per cent and Burmah Oil 24f per cent, the public will only have to sub- scribe under £15 million. The issue is intended to finance the company's expansion in the [Continued on page 86
Continued from page 83]
sterling area (Libya and the Persian Gulf), includ- ing the development of North Sea gas (which will cost at least £20 million to bring home). The company is also moving more deeply into chemicals and petro-chemicals, as well as retail distribution. My colleague recently stated that the Government might require the British oil com- panies to finance their development overseas by raising capital overseas. BP has already raised £50 million of long-term loans abroad. It is making this 'rights' issue in equity shares because, having no immediate corporation tax liability, it has no tax advantage in issuing loan stock. The company's profits in 1965 will be slightly down, but the company is maintaining its 1964 dividend distribution—thanks to the tax concessions it has received—which will mean 2s. 4d. per share, tax-free. For 1966 I am guess- ing a dividend of around 18 per cent gross, giving a potential yield at the present market price of 60s. of 6 per cent against the present yield of 6.6 per cent. If the 'rights' issue brings the share price down, this will be a good opportunity for investors to pick up a first-rate oil equity free of stamp.
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