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BP pledges to return all free cash flow to shareholders

BP has outlined an aggressive dividend strategy for the coming year, promising to return 100% of its free cash flow to shareholders ? which will likely total more than $23 billion.

While many companies have promised to return much of their free cash to stakeholders, few have been so explicit or comprehensive.

CFO Byron Grote and group chief executive John Browne made the promise after BP's annual results were announced this morning. The company reported profits of £9 billion in 2004.

The BP dividend for the fourth quarter of 2004 increased 26% from 7.1 to 8.5 cents a share, the biggest single increase in its recent history. From first quarter 2005 onwards, Browne said the dividend would continue to increase in line with earnings expectations. He did not expect that it would ever drop below the improved level of 8.5 cents a share.

?We expect to grow the dividend beyond 8.5 cents in line with our view of future sustainable performance. We estimate that this level of dividend allows us to maintain prudent earnings cover even if oil prices went down to $20 dollars a barrel,? he said.

Browne added that the company would commit to returning all free cash flow to shareholders as long as oil prices remained above $20 a barrel, and that if the price were around $30 a barrel the total returned would top $23 billion.

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