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Work: More Surprising Profits for Oil and Gas Producers
BP has reported “exciting earnings” at a time when the public is very worried about their energy bills jumping in the autumn, says Labour’s shadow chancellor Rachel Reeves MP.
“People are worried about rising energy prices in the fall, but once again we see spectacular benefits for oil and gas producers.
“Labour argued for months for a windfall tax on these companies to help reduce bills, but when the Tories finally turned around, they decided to return billions of pounds to producers with tax breaks. This is totally wrong.
“It’s clear that people need more protection from rising bills. That’s why Labor would use that money now to help people get through the winter.
“But we can’t continue like this. Labor would cut energy bills for good with a green energy sprint for home-grown energy, and a 10-year warm homes plan to cut bills for 19 million cold and air currents
Today’s results show that bp continues to “perform while transforming”, says the company’s CEO, Bernard Looney:
Our people have continued to work hard throughout the quarter to help solve the energy trilemma: secure, affordable and lower carbon energy.
We do this by providing the oil and gas the world needs today, while investing to accelerate the energy transition.
This is BP’s highest profit in 14 years, Reuters reports, just as families face the pain of winter energy bills.
BP will also channel profits to shareholders through a new share buyback program.
The company has announced that it will do $3.5 billion in share buybacks, a way to return cash to shareholders.
BP can afford this because it generated $6.6 billion in excess cash flow last quarter, saying:
bp has now announced share buybacks from 2021 and excess cash flow for the first half of 2022 equivalent to 60% of accumulated excess cash flow.
BP also bought back $2.3 billion of shares in the past three months.
BP’s profits soared to $8.5 billion on strong refining margins, continued “outstanding” performance in the oil trade and higher energy prices.
BP raises dividend
BP is increasing its payout to shareholders by 10% as investors reap the rewards of its jump in profits.
The company will pay a dividend of just over 6 cents per share, compared to 5.46 cents per share in the first quarter of the year.
The $8.5 billion profit that BP earned in the last quarter was significantly higher than analysts’ forecasts ($6.8 billion).
So far this year, BP has made underlying replacement cost benefits of $14.7 billion, nearly triple the $5.4 billion in the first half of 2021.
BP’s profits triple to $8.5 billion
BP tripled its underlying profits in the last quarter as it benefited from higher energy prices.
The energy giant has reported an underlying replacement cost profit of $8.45bn (£7bn) between April and June, up from $2.8bn in the second quarter of 2021.
That’s also even higher than the $6.2 billion underlying replacement cost benefit it earned in the first quarter, which was the highest in 10 years.
Updated at 07.14 BST
Laura Hoy, equity analyst at Hargreaves Lansdown, predicts (via the Daily Mail):
“BP will continue to reap the rewards of high oil prices in the second quarter with good profits expected.
“BP has promised new share awards worth $2.5bn (£2.1bn) in the second quarter, to return some of the excess cash flow to investors, although no return is guaranteed for those shareholders”.
Introduction: BP for high profits
Good morning and welcome to our continuing coverage of business, the global economy and financial markets.
BP CEO Bernard Looney described his company as an “ATM” last November. And today, we find out how much profit BP made last quarter as the war in Ukraine drove up energy costs.
BP could report its highest profit in more than a decade, reigniting the controversy over energy companies making money during an energy crisis.
The industry has benefited from rising oil and gas prices that have left millions of UK households struggling to pay their bills, which have risen to more than £3,000 a year this winter.
Analysts forecast BP’s underlying earnings could reach $6.8 billion in the three months to June, more than double the $2.8 billion a year earlier. We’ll find out when the BP results are released at 7am.
That’s even higher than the $6.2 billion in “underlying replacement cost benefit” that BP earned in the first quarter of the year, due to high operating cash generation, strong oil trading and gas and a significant improvement in refining margins.
BP’s oil peers have already reported impressive earnings in the latest quarter, with Shell posting adjusted profits of $11.5 billion … and Exxon reporting an unprecedented $17.85 billion.
He will come today too
Bakeries Greggs, drinks group AG Barr, Domino’s building materials supplier Taylor Wimpey are also reporting results, while building society Nationwide publishes its latest house price data.
British Airways has reportedly suspended the sale of short-haul flights from Heathrow for at least a week, adding to the problems facing tourists this summer.
Thousands of seats are being removed from sale as BA meets Heathrow’s 100,000 passenger per day limit. It will push already high industry-wide prices even higher, The Times notes.
Stocks are a bit jittery this morning as traders brace for US House Speaker Nancy Pelosi’s expected arrival in Taipei this week as tensions rise between Washington and Beijing.
Brent crude fell below $100 a barrel overnight as recession fears also rose after weak factory growth figures yesterday.
the agenda
- 07:00 BST: BP Q2 results released
- 7:00 BST: Greggs, AG Barr, Travis Perkins and Domino’s also report results
- 7:00 BST: National House Price Index for July
- 15:00 BST: US JOLTS survey on job openings in June
Updated at 06.56 BST