tv On the Move Bloomberg February 2, 2016 2:30am-4:01am EST
>> welcome to "on the move". i am guy johnson alongside jonathan ferro. a number of stories out that need attention. jonathon: bp, profit down 91%. we expected some pain in the upstream business. the average price in the mid 40's. we been talking about a crude route for 18 months now. the comparables are still very -- you solve the numbers this morning from bp. guy: we also need to talk about what is coming up in terms of
the apple and google story plus also what is going on with the alpha that story. the factng in terms of that one has overtaken the other. that is going to be interesting. ubs, interesting, not that interesting. the comparative with deutsche is interesting. jonathon: profit up 11%. switch it up again, move it on. we are talking about google and the potential of that company taking on the market cap of apple. it was that energy was going to suffer and tech was the future. this time around, look at google versus apple. is the story that apple has lost value. amazing. complete turnaround. guy: why is the market making that decision? is it an innovation? the future will
actually be the one generating the topline growth and apple will suffer. where does the revenue come from? we can discuss that over the next 90 minutes. let us corporate caroline hyde. caroline: senator ted cruz of texas has one bank the iowa republican caucus in an upset over donald trump. hillary clinton and bernie sanders are virtually tied. heefiant donald trump says will be whoever you put in front of him. >> i don't know who will win between bernie and hillary. i don't know what will happen with hillary. she has big problems. had so many different indications and polls that we beat her and we beat her easily. we will go on to get the republican nomination and we will go on to easily beat hillary or bernie or whoever the hell they put up there. caroline: federal reserve vice
chairman stanley fischer says the u.s. central bank will not design in advance it will raise rates this year. any decision will be based on how the economy is going. repeatedlyittee has repeated that the next policy decision will be data dependent. we will adjust policy appropriately in light of the economic events to best foster conditions persistent with the employment objectives. tooline: alphabet is poised leapfrog apple as the most valuable company in the world. shares jumped. based on online applets sales. the company's first earnings report under its new structure. guy: half an hour away into the european market opening.
looks like it will be fairly negative. the fair value calculation coming looks like we will be down, not that much. fairly flat at open. down about .3 of 1%. a lot of corporate's on the move. jonathon: it is a stock story. switching out the board. checking out rent. that is the story of bp. profit down 91%. brent crude, $33 a barrel. the average, $32. the average in the third quarter was $42. upstream of the business. stronger yen for a second straight day. crude, the oil is once again the story. guy: bp front and center. profit humbly 91%. the average crude price drop to
the lowest in more than a decade. later in the program, we will speak to the company's ceo. a first here on bloomberg. bloomberg's with chief energy analyst. this is the first of the majors. can we still call bpa major? these are bad figures. >> awful figures for the market. we were expecting on an adjusted basis, about $800 million. bp has it less than $200 million. worrying is that bp and other oil companies have been relying for the last year on refining and trading to make up for the losses of their sustaining in the absence of production. in fourth quarter, that has
disappeared or is a lot weaker than it has been in the past. --ining and trading delivered a billion dollars in profit. half of what they did in the previous quarter. fall in bp big numbers. the refineries were not able to profit as much as they have done in the rest of the year. jonathon: guidance, for the next quarter is not much better. when you put the story together, what you see is a company maintaining dividends, net debt the equity is up 3.6% this year. i wonder, the dividend story. it will be the question again today for mr. dudley. >> we will continue within the market, and we will continue taking debt for the time being. you see how much the debt ratio
of bp is starting to move. a year ago, they were about 16.5% percentage points. now, 21% percentage points. bp has suffered over the last 12 months because of low oil prices. the guidance for first quarter is not pretty whatsoever. lower refining market and also in the short-term, bp thing they do not see any improvement in oil prices. the statement was negative in the guidance is -- we do not see the light at the end of the tunnel. nervousuld we be particularly if you are an income investor. you have got to worry about that -- whether or not you will get paid. >> the big story has been pressure on earnings in the energy commodity space. that leads one to suppose that
dividends for the whole market, dividend growth or this year is not a foregone certainty. jonathon: how do you take this one forward? do you sell the stocks now? do you go early? >> there are other areas in the market that yield handsomely. moving outside the energy you will seece, anything exposed to the domestic european economy starting to really move. services pmi's look pretty good. around 54 across europe. manufacturing pmi is much closer to 50. are in our dividend funds, we are much more exposed to domestic than we are to global manufacturing. jonathon: the one bright spot may be the space left on the balance it -- the balance sheet.
>> it was a big surprise. have thought bp would have tried to use that leverage and send out a positive message. if things continue to be bad in the first quarter, when the results come in, that is where we will see the big reduction capex.n at $60 by cash flow next year. now, he is saying he can do it even lower than $60 because it will reduce costs. to breach that position, it would be another -- on capex. an announcement in april when the first quarter results come out. thanks so much.
jonathon: hello and welcome back to "on the move". we are 17 minutes away from the european open. bp is the story on the index this morning. down 91%. a big miss for the oil major. let us go over to caroline hyde. caroline: googles parent alphabet is poised to leapfrog apple as a most valuable company
in the world. shares jumped on out the that's -- on out the best better than expected results. -- on alphabets better than expected results. has agreed to buy home retail group. the deal combines two of the biggest retailers in the u.k.. the acquisition would be .ainsbury's biggest buyout -- has said that come. -- come. net income in the fourth quarter be analysts and -- analyst estimates. jonathon: let us get back to ubs. ceo told bloomberg that people
are paralyzed by the market volatility. >> when you look at the dynamics of the fourth quarter and you look into our january start, you could see a trend continuing. there is a high level of risk aversion. people are happy with their asset allocation in general and they are paralyzed by this high volatility and the geopolitical and macroeconomic news ac. jonathon: let us bring in stephen. great to have you with us. ubs. billion of net new money outflows from the wealth management unit. that tells the story of the last quarter. >> that has clearly been the big move in the market. would be surprised if that is actual terms. it is a great business to be in
but you do need flows. a lot of people are slightly been used about which asset class they should be favoring. answer?t is the >> you are not getting much yield out of the bonds. at the moment, there is still a decent yield pickup you get in the equity market. but you have to deal with a lot of volatility. jonathon: which is sector do you go to? lookinge moment, we are at much more domestic than global. in 2016, this prize could be if global manufacturing -- the surprise could be global manufacturing. you have to go domestic. you have got to be looking inside europe. >> it is a domestic services story.
if you look at the areas that have done well, insurance continues to two prosper. the big story in insurance has been interesting. yields nailed to the floor. insurance companies are not making a lot of actual income. they have been very disciplined about underwriting and cost. sense that they have addressed some of the issues that people thought they have on the balance sheets. they have good dividends as well. ofyou look in other areas financials, asset managers, stock exchanges. which are one of the few areas of the market that actually than if it from volatility. it tends to move up the -- jonathon: the investment bank not so good at all.
the big story for the u.s. bank in the last quarter was getting expenses down. they could not cut costs quickly enough. my question is how much fat is there left to cut for the in -- investment banks across europe? issues that they are all facing is that they cannot boost their profitability to leverage. time, the volatility across a variety of assets means it is difficult to make money out of fixed income. it is a tough business to be in. guy: every line was down. are there any good businesses in
investment banking right now? >> everything is suffering from the volatility. in the background, you have slight concerns about high-yield and lower investment grade bonds. it is a pretty potent mixture. it will be a tell year again for a lot of investment banks. guy: thank you. we are minutes away from the open. we are looking at what is going on with bp being hit by the price of crude. ♪
drop. the reason is because of the disappointment in the 91% drop in their overall profitability. the reason is the oil price and the oil price dropping once again today. we are expecting bp to fall lower. it is currently at 36.95. this companies market valuation below $100 billion for the first since the gulf of mexico spill in 2010. key moves there for bp and for ubs. even though we are seeing profits rise some 11%, it has largely been mass -- masked. this is a tax gain helping to offset the gain of wealth management. 3.4 billion swiss franks. that is the biggest drop in wealth management spill in 2010. key moves there for bp and for ubs. even though we are since the second quarter of 2010. some concerns for ubs.
do keep an eye on some good news for you because we have home retail group home retail group likely to see a bounce. beculation that they could eyed up by sainsbury. 152.90. the offer finally comes in. 161.3 p for home retail group hurt 1.3 billion pounds. premium before the speculation came out about the offer. is still with us from j.p. morgan asset management. that story sounds incredibly negative to me. sainsbury is struggling to figure out what is coming in. the credit story in the retail space is quite negative. if you look at what is going on in the retail space is there anything good?
>> across europe, consolidation. there is a sense and which people are having to adapt their businesses to the threat coming in from the discounters. discounters have been around for a long time and they are starting to make their presence felt in the u.k. there has to be emphasis on cost. at the same time, what we should see over the next year is improved consumer confidence. depending on which market you look at, spanish consumer confidence or italian, there are multi-year highs. it is not as dark as people think. jonathon: stephen will stay with us. bp in focus. can they maintain that dividend? that seems to be the problem.
jonathon: hello and welcome to "on the move". from the start of the european trading session. profits tumbling 91% missing estimates as the average crude price drops lower in the last decade. we are speaking with the ceo later in this hour. rally in extended trade this after earnings. ted cruz wins in iowa. hillary clinton and bernie sanders virtually tied in the democratic contest.
we are negative going into the open here in europe. plenty going on. jonathon: it is a corporate story. bp in focus across europe. banking story front and center. .bs headline numbers decent investment banking numbers not so decent. caroline: risk aversion once again. a negative day on the market yesterday. stocks in europe. looks like it will be negative again. concerns once again over oil. oil trading lower as we get supply concerns from the u.s. -- oil story again. seeing phpg to be with a negative rating. the miners and the oil companies on the downside. shell, they have had their ratings cut by s&p. clearly, risk aversion.
chinese shares bounce today. very thin trading. pboc in justhe cash ahead of next week's holiday. the rest of japan, asia trading lower. brent down by a percentage point. $33. the premium widening out again. the u.s. contract 31.25. 3.5 millionout barrels. many anticipating supply going to be a concern for oil once again. u.s. dollar down, yen goes higher. more detail from asia. haven seeing a slight that was the japanese yen. looking at the stock today. ubs, down almost 5%. it is not about the overall tax
boeing the number. there was a concern that wealth management had its worst quarter ofce the second quarter 2010. outflows. investment banking not looking pretty. ubs. home retail dropping. the premium is 5.5% higher. sainsbury at last miss to go shopping. last plans to go shopping. deal go through? we still wait for bp to open. it is thought to be about 3% lower as profit is down 91%. let me get you up-to-date on where the stock market is trading. ftse 100 down by a third of 1%. a busy hour ahead on "on the move".
we are working down the corporate earnings. eurozone., we get unemployment data. at noon, the brexit debate takes center stage. heads can untangle the more intractable problems are in the united states, the federal reserve bank of kansas city will be's taking at 530 p.m. london time. quarter stock -- fourth outcome saw a net new money outflow. manus cranny is standing by to talk us through his conversation with the ceo. what did he say? it is a balancing act.
the worst words in the world. risk aversion. more pronounced in asia. language used -- 2016 will be a tough year. balancing between saving the investor with the dividend. profitabilityent dropped by 47% in the final quarter of 2016. 63%investment bank down year on year. the equity division. fx and credit did a little bit better. the business is under pressure and activity is under rusher. has avidend, the market hefty expectation for this year and next. are you back to into a corner in terms of the commitment? >> our dividend is a reflection of a strong year. and also a reflection of a
strong year in our operating profits. that is why our ordinary goes up 20% year on year because we had a strong operating environment in terms of profits. we are also adding $.25 of dividend as a special dividend because of the deferred tax asset valuation. manus: when i pushed him harder, i asked if he was committing to the $.88 the market wants to see this year and he said it was too early to say but they are committed. negative performance and strong headwinds. that is as the year kicks off. jonathon: in terms of negative rates, that is the big story globally. i wonder what he said you as he looks across the whole income network spectrum complex with negative rates all around.
manus: first of all, they have already raised this issue back at the end of the third quarter when he pushed back on the profitability target. the issue is that these people suisseit sweeties all -- . they have been living with negative suisse for quite a while. >> we are getting used to manage in a negative rate environment for at least one year and longer if you look a certain parts of our business in terms of swiss franc's. we are prepared to do that. you see that in the way we manage our balance sheet and our deposit base. to manageeady wired this challenging environment. wired to manage a negative rates. interesting words. they will take action where
appropriate and they will manage the balance sheet. very much along the same lines as julius yesterday. a tough opening for the stock. down 4%. the component parts of this business are under pressure. the language they are using -- it will be a tough year ahead. guy: manus cranny out of europe. a big week for swiss franc's -- swift banks. -- swiss banks. theidea was that ubs had right business model and was moving into matt -- into asset management. it is turning out to be a much tougher business. what you do with that as an investor when you look at the banking sector? view, weur point of can see specialist asset
managers. in places like italy we have a very entrenched savings habit. asset managers there -- investment -- an bank. if you're looking to get your exposure to asset management, it is good to go into the specialist. jonathon: how competitive will that get? ubs had it its own way for a while. everyone wants to come back for from the more costly experience. how competitive will that get in terms of wealth management? >> you have to innovate the products you offer.
we brought the offering that we have. we have a lot of active extensions rather than relying on one business. you have to be very innovative and you have to offer stuff that is attractive to people. jonathon: in terms of regulation, ubs, they raise a lot of capital. they are in a good position versus deutsche bank. when you look at banks geographically within europe. >> the regulatory pressures on price over the last live years have been intense. what we were hoping is the conclusion of the stress test ford be a cathartic moment banking. initially, it looked like things were improving last year. credit numbers still look good. thanks have underperformed because there is still pressure
ftse 100 down by .601%. the dac up by 31 points. texas senator ted cruz of has one bank the iowa caucus in over donald trump. donald trump is defiant and says he will beat whoever is what in front of him. >> i don't know who will win between hillary and bernie. hillary has other problems, maybe bigger than the problems she has in terms of nomination. we have had so many different indications and polls that we beat her and we beat her easily. we will go on to get the republican nomination. we will go on to easily beat hillary or bernie. nejra: oil has dropped for a second day i had of bp data which is expected to show u.s.
stockpiles have expanded further exacerbating a global glut. royal dutch shell had his -- had its rating cut. ubs shares are lower after the in the fourth quarter boosted by a text gain which upset the decline in wealth management. net income in the fourth quarter was 9 -- 949 million swiss franc. beating analysts estimates of 911 million francs. guy: central bank has extended its interest rate caused. -- cause. india has also kept its rate unchanged at 6.75%. bloombergr spoke to
about the threat posed by the slowdown in manufacturing. >> it has declined. again wait and see what develops. we are in a process come the american economy is in a long run process of manufacturing declining as a share of gdp and services continuing to increase as a share of gdp. there has been a tendency for manufacturing to grow less rapidly than gdp for some time. feds will not decide in advance on how many times it will raise rates this year but instead will base its moves on economic indicators. he also spoke of the efficacy of negative rates. >> countries that have continued to use this -- we even had the
danes undertaking a contractionary monetary policy. to -65 basisnt points. thereby raising the interest rate. more than i can 2012 buti expected in i was not on the committee at that stage. jonathon: i think that was some monetary policy humor from stanley fischer. let us bring in the head of strategy at j.p. morgan asset management. the next critical decision and the hurdle for the next great height seems to be higher than it was in december. the fed has alluded to that in statements made. is key point to focus on from a central bank point of view, what are they trying to achieve -- increase the velocity
of money. money velocity has been disappointing. , evenriver for growth expect more of that. where does it go? >> what you're looking at is economies going through a very slow restructuring process. eurozone unemployment remains high. it has been falling for two years but if you think about where that came from, two areas, government expenditure. there was huge pressure to retrench fiscally. banking sector in the individual countries including spain. a lot of jobs lost their and those created in the private sector. there is a sense in which the momentum is passing to the private sector to a more dynamic domestic driven economy and that
is good news. jonathon: velocity of money. the hot potato monetary policy scenario. for japan it is different from the eurozone. in the eurozone, a demand for credit. you want to push money out and get thanks to lend -- banks to lend and do something there. attacks on japanese banks. not the same for each country. eurozone and what is happening to the negative rates and what could potentially be happening with japan as well. >> it is different in each country. japan, a focus on restructuring some of the business practices. within the eurozone, it is about increasing the ease of doing business and re-creating the domestic economy. guy: do we need more of it to get of the asset prices? >> we will see earnings rising
in europe. off.arket clearly has sold sentiment is on the floor. if you look at the american survey two weeks ago, percentage of retail investors that were optimistic was the lowest it has been in 20 years. guy: the boj and the ecb. that isary stimulus potentially out there. we have to wait for the march meeting of the ecb to know what direction they will take. jonathon: we appreciate your time. up next, taking a bite out of apple, google parent alphabet is set to become the world most valuable company topping the iphone company. ftse 100 at a session low down by 40 points this morning. ♪
profit down by 91%. the upstream business, the production side of things, people expected that to be ugly. negative views for the oil major this morning. on to u.s. markets, the world's most valuable company could be replaced by another tech titan. alphabet is on track to leapfrog apple after the earnings result per share was up after hours. here is caroline hyde. a decent set of numbers but is this about alphabets/google or more about apples decline from the heavens. caroline: if you look at the chart, both have been encroaching on each other's space. not a good news story for output -- for outlook. they -- four apple. comparisonis tiny in to apple but the market police it could be a more valuable
company. guy: this is an indication that apple has gone ask -- ex innovation. opens -- it's alphabet 550 billion dollars in terms of market valuation. ishares dropped 9.4%. valuablee most companies are tech companies. up 19% in terms of sales profit in the fourth quarter. they are increasing in terms of mobile search and the number of times we are clicking on their ads. the volume is going up by 31%. a tightmanaging to keep fist on discipline in terms of cost cutting. managing to bring that down 30%. -- 13%. you have apple claiming about
the billion devices they have on the market. trying to sell itself as a services company. check out the google numbers. android, maps, chrome, youtube and google play all have over a billion monthly active users each. rightsow joins those crossing that number last quarter. caroline: they have a billion for each of those products. asy can show themselves off a globally dominant force. ane of the moon shots were integral part of the business. hasficial intelligence that already been worked into the area. other partets, the of alphabet -- they are bringing in revenue. they are bringing in about $500 million already.
the question is how much will a self driving car drive forward there is valuation. jonathon: at the core of this value $250 billion in wiped off the company. these are huge. going back to 2011 when apple overtook exxon mobil. we wondered what this meant for apple. still an incredibly profitable company. your future is bright. stock itld the growth was over the last several years, is it over? view is: the overall that this is a company that has a different business model from the likes of alphabet. they may now need to show the
♪ bend me shape me, any way you want me as long as you love me, it's alright bend me shape me, any way you want me you've got the power, to turn on the light shape the best sleep of your life. sleep number beds with sleepiq technology adjust any way you want it. the bed that moves you. only at a sleep number store.
jonathon: welcome back. this is "on the move". european equity markets. let us give you a picture. ftse 100 up by 72 points. the big move lowered from bp this morning. profit down by 91%. the lowest in about a decade for crude. the guidance for downstream, for margin in the coming quarter not pretty either. that has been the upset for these oil majors the last few quarters. takingappointment for bp the benchmark lower here in london. brent crude at 33.64. down by 1.75%.
the correlation between stocks and crude is there. stronger yen. risk off. euro-dollar. a lot of corporate news. that is the story of across europe. bp, one of the laggards on the stoxx this morning. off by 6.3%. the concern, the pain you are seeing on the bottom line from the fact that oil prices continue to say. theirrofit down 91% in earnings. they are now being evaluated at more than $100 billion, the lowest since the gulf of mexico disaster in 2010. 3000 jobs to be slashed in the downstream business. taking dramatic action.
ubs down at 7.5%. doing worth -- worse than bp. 11% growth in profit. improving into be wealth management. wealth management, money drop for the biggest the wealth management unit since 2010. they are also speaking volumes about this market. fourth quarter characterized by very low levels of client activity and pronounced risk aversion. will that change up? ubs is on the downside. upside, other retailers. sainsbury and home retail group is is a retailer or a tech company? the numbers live up to expectations but they are saying
that they have a smart platform. the technology unit is proving to be of great interest to a significant number of retailers. they expect multiple deals to be signed. guy: turning to politics in the united states. senator ted cruz emerged from iowa to win the caucuses. bernie sanders and hillary clinton are in a virtual tie. this is what the candidates have been saying. finishedump: we second. i am just honored. really honored. i want to congratulate ted. ted cruz: tonight is a victory for the grassroots. tonight is a victory for courageous conservatives across iowa and all across this great nation. sanders: while the
results are still not complete, it looks like we will have about half of the iowa delegates. hillary clinton: i am excited about really getting into the debate with senator sanders about the best way forward to fight for us in america. hanslet us talk to nichols. iowacan we take out of into new hampshire? : the idea that donald trump is the inevitable candidate has been punctured. third place.s in a much stronger third place in anyone expected. 23%. 99% of the republican precincts are in. the fact that ted cruz is leading, don't take too much from that. had the organizational game
plan to defeat donald trump who was weakened by ted cruz. longwill be a close and race. something about hillary clinton that core democratic voters do not like. ago, myr -- eight years years i like presidential years. i think in dog years. in new hampshire, you saw hillary clinton lose in iowa. she came in third in iowa and then new hampshire, she was above obama. new hampshire often negates what iowa did. you have a tied. either way, if new hampshire once to go against iowa come they just need to make one the clear winner. there has been frustration among people watching this. political entertainment, you go to the presidential race in the
u.s. we do not have real substance. talk about policy. typically takes place in may and june when no one is paying attention. that happens in five months once we have nominees. months, or the next 2-3 weeks, you will see a real debate among the moderates in the republican primary. christie, and mr. john kasich from ohio. substance free. the argument on the republican side will turn into who is best positioned to take on a wounded hillary clinton who most republicans still think will be the nominee. they are just gleeful that it will be a weaker hillary clinton. rubio did well in
this. there is clearly a core republican move coming to the four -- fore. how quickly do people like bush fallout? ins: south carolina is later february. it will be hard for some of the candidates to stay in if they get 2% there. thank you. jonathon: breaking news. chinese central bank allowing a five percentage point cut to minimum -- minimum mortgage down payment. easing the rules. this is not a big stimulus plan
but some easing. for a very sensitive sector in china that has been driving the economy in a big way. countries around the world have been obsessed with housing. this is making it easier on the demand. they have a lot of supply but they need to boost demand. in the u.k. k, it was quite successful. jonathon: the chinese central bankthis is making it easier one demand. they have a lot of supply but they need to boost demand. easing mortgage down payment rules for some homes. up next on this show, bp --ounces a four-year profit four-year drop in profit of 91%. we speak with the ceo, bob dudley. that is next. don't miss it. ♪
jonathon: hello and welcome back. stocks are lower down by one full percentage point on the ftse 100. 80 points in the red. google parent out of that is poised to leapfrog apple as the most valuable company in the world. shares jumped on the better than expected results a strong strong online purchase. the first earnings report under the new structure. sainsbury has agreed to buy home
retail group. uk'smprises two of the biggest retail groups. the acquisition would be sainsbury biggest buyout giving it 800 stores. 1.3 billion shares after meeting target -- capital target. guy: bp has revealed the impact of plummeting oil prices. the oil major has taken a 91% hit on profit. let us get with the bloomberg chief energy consultant. we will be speaking to the ceo in a few minutes time. say ines dudley have to this interview to explain what we have just seen from his company? >> he needs to explain to
investors that the dividend is safe. not only the q4 numbers, if you look at the overall profitability for bp and particularly you are looking at the guidance for the most immediate worker, q1 2016 is pretty poor also. what does this tell you about the rest of this? hector upstream is due -- upstream is doing poorly. is it a bp problem? a widespread problem for the oil sector for the majors. two sectors, refining and treating have been good for the european oil companies and for the americans. refining will be weaker across the board for everyone else because the refining markets have a habit of coming down. ,hank you for, they were week
in q1 they are weaker. dudley will have to do some explaining there. bp badlyid traders in read the market. that could change quickly. that is a problem of trading. it could be volatile. the traders have been talking independent oil. they enjoy a good quarterly performance so it comes as a surprise. to.thon: no reduction no increase in production. -- no reduction -- no reduction to capex. downsizing since the condor. the prospect of growth has diminished. cuting capex, you expiration.
try to tell shareholders they will reduce the effects and an investment without putting any growth. , productionapex starts to suffer. jonathon: hillary clinton secures the narrowest win in the iowa caucus. after the break, we will be talking with the ceo of bp, bob dudley. profit down 91%. not pretty. what he has to say about the future of the company and that dividend. ♪
guy: welcome back. bp having a bad morning. the company reporting a 91% drop in profit. toughlike it will be a day for the oil majors in general. ryan chilcote is with bob dudley. we're joined by bob dudley. thanks for being with us. decline ina sharp the oil prices, it went from $77 a barrel in the fourth quarter $40 in thethis low
last quarter of last year. a lot of people were expecting cute to cut capital expenditure but you did not. then 2013, we were in $24-20 seven dollars range. we have come in at 18.7. the scope is to reduce capital. we have big projects and we want to make sure we do not threaten the growth of the company. ryan: you have been guiding the market towards 17 billion this year. 2016, where do you see that number coming in? >> the low end of that guidance. we see cost reduction. ryan: scoop to cut it further, -- scope to cut it further. >> this year we have deferred a couple of big projects because we see the deflation coming in. the economics are better if we move those back. ryan: if you look at your
leverage, they grew from 16.7% to 21.6 percent. an increase of 5% in just one year. >> before the accident in the gulf of mexico, we ran the net debt between 20-30%. we took it down to meet the uncertainties in the gulf. we are drifting back up to where we have historically been. ryan: where do you see it in a years time? twohis year looks to be hats with the oil price. first quarter, tough and choppy and supply and demand tightening with higher oil prices. ryan: how comfortable are you, how high are you prepared to let debt go before looking at the dividend? >> let me put the dividend in perspective.
$6.6 billion a year is our dividend payment. theoperating cash flow in fourth quarter was $5.8 billion. put that in perspective. we generated about $20 billion in cash last year. $17 billion in capital to move around and we have $24 billion in cash costs across the company. tohave all of those pieces work with to ensure we can continue to pay the dividend. we have a lot of leverage. ryan: are you prepared to see gearing go above 25% to maintain the dividend? what if it grows by 5% this year if oil prices persist at these lower levels. with a comfortable gearing above 25%? >> we are flexible around the
gearing levels. 25% gearing does not make us nervous. we operated for years at levels like that. strategy ifs your oil prices remain where they are now in a year? scenarios at flat oil prices. we think deflation will come through. we are a complicated company. organization and staff. that is sustainable for us. we have to be careful about managing scarce capital and keeping down our costs. ryan: what oil price do you need to break even? in the past you have said $60 a barrel. >> at $60, we can balance the books effectively. that number is coming down now because supplier costs are coming down and there is deflation.
we are dropping our own costs. that number looks like if it is not $60 we have targets below that to be able to balance the books. ryan: when we look at the numbers, it looks like it was a difficult quarter and your traders misread the market. what happened? well inas traders did the oil traders were a little off. it was not far off. refining, another part of the downstream business that perhaps did not provide as much support as many would have hoped. it was also a bit softer than people anticipated. you just said you think the first quarter will be softer still. where do you see refining margins later in the year? >> traditionally come you see the fourth quarter and the first quarter as softer. start to see the gearing up for the summer. sense to does it make
shrink the company? bp is getting smaller. and risk earnings growth to maintain the dividend. >> we have not made decisions to risk that growth. we have a lot of decisions going on and a lot of capital going out. maybe not as much as in the past. we have vast projects. many are gas products with fixed gas prices. there is a lot of growth in the company. we are slowing down a little bit, expiration. we still $50 billion in assets. 75 billion if you count our stake. with as left us portfolio we really like. ryan: in terms of restoring your growth potential. bgll did a big deal with
that is going through and that will allow them to replenish their reserves. you have got -- bp has the lowest growth the analysts think of the big european oil companies. where do you see the opportunities? you have not done a lot of shale oil in the united states. are the conditions right? have lowt see that we growth prospects. when we look at the objects we have underway today, i see it hundred thousand euros of new production coming by 2020. they will start coming in his 16th and really come on in 17 and 18. thing for us to focus on is to get our own house in order and deepen our projects. people have come to us offering projects. that is the focus now. ryan: devaluations you're
looking at right now, are those attractive? >> depends on where they are in the world. ryan: when we last spoke in june and in february coming you talked about getting your house in oil before you looked at acquisitions. -- getting in the your house in order mode. fast off theen mark starting in late 2013. we needed to simplify ep anyway. we still have a ways to go. now, we have a lower oil prices tosing the entire industry change. ryan: if you look at your reserves, howlace do you turn that around? >> the way you replace your reserves is not finding it through expiration.
final investment decisions on projects. we took a few projects and said wage. the economics will get better because the cost will come down. i think it shows good discipline on our part. ryan: looking at the last three years, we had the best reserve replacement in the industry. the head of your upstream business has become the deputy ceo. lamar mckay. couldre speculating that be the beginning of a succession plan here at bp. >> no. i enjoyed what i do. we had one executive team member who has been wanting to retire. all of the us take jobs that the executive team has. let us not replace that role but scatter it further. asking our teams to simplify and do more with less.
it is can you stand with that. with lamar mckay, this will allow me to focus and travel more. it is a really tight team. we work together well. ryan: looking at the dividend yield, it is just shy of 9%. there are a lot of people out there that say you have to cut the dividend. can you guarantee there will not be a dividend? cut? can never guarantee. we have no plans. feedback from shareholders indicate it is very important. we have cash costs to reduce and we have some flexibility on the gearing. unless it looks like $20 for a long time, i think we are in good shape. ryan: it is your sense that we will not go to $20? and secondhe first
quarter, as the iranian storage barrels go on market, you could see spikes in the marginal theel as they go out but by third and fourth quarter supply and demand should go back into balance. 93 million barrels a day produced in oil around the world. there is only a one billion barrels surplus and that will close sometime this year and by then, all of the stock tanks will be filled. convinced -- ot >> part of a trough. they did they come at you could have spikes up and down. february, we met in your focus on rebasing the company on $60 it barrel. rebasing the upstream and downstream. ryan:
we are just replacing it for today's price. balance at 60 next year. we know that number is going to come down now. we are able to balance below 60 when prices are down. ryan: you mentioned iran. what would bp like to do in iran? i want to understand what the sanctions are. ryan: a lot of people think it is easy to do business in iran, but that is not the case. what kind of obstacles, deal price aside, are there for bp and say you as an american running bp? bob dudley: some of the sanctions have not been lifted by the united states. that makes us careful. there's lots of things out the world that are competing for capital. iran may be one but mexico is there,