- Profits rise to $8.45 million, far beating forecasts
- BP increases dividend by 10%
- BP to increase oil and gas spending, CEO says
- Profits boosted by strong oil trade, affected by LNG
LONDON, Aug 2 (Reuters) – BP’s ( BP.L ) second-quarter profit surged to $8.45 billion, the highest in 14 years, as strong refining margins and trading boost its dividend and spending on new oil and gas production.
The strong performance caps a boom quarter for major Western oil and gas companies as rising energy prices have increased pressure on governments to impose new taxes on the sector to help consumers.
“The company is performing well and continues to get stronger. We have real strategic momentum,” Chief Executive Bernard Looney told Reuters.
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BP shares were up 4.3% at 1315 GMT, hitting their highest levels since June and strongly outperforming the European energy index ( .SXEP ), which was up 0.7%. BP shares have gained 23% this year but are still 10% below pre-pandemic levels.
Looney, who took office in 2020 with a pledge to move BP quickly from fossil fuels to renewables, said the company would increase its spending on new oil and gas by $500 million in response to the global supply crisis . Read more
“We will direct more investment into hydrocarbons to help with short-term energy security,” Looney said. “We’ll probably allocate about half a million dollars for hydrocarbons.”
BP plans to keep its overall capital spending this year in a range of $14 billion to $15 billion.
BP raised its dividend by 10% to 6.006 cents a share, up from its previous guidance of a 4% annual increase. It halved its dividend to 5.25 cents in July 2020 for the first time in a decade in the wake of the pandemic.
The company also increased its share buyback plan for the current quarter to $3.5 billion after buying back $4.1 billion in the first half of the year.
“The fact that it produced its highest quarterly profit in 14 years, even though oil prices were higher during that period than now, suggests that BP is a more efficient machine than before,” said the director of ‘investments by AJ Bell, Russ Mold.
The company said it expected crude and gas prices, as well as refining margins, to remain “elevated” in the third quarter and said it would stick to its target of using 60% of its surplus of cash in the repurchase of shares.
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The British Petrol BP logo is seen at the gas station in Pienkow, Poland, June 8, 2022. REUTERS/Kacper Pempel
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The increase in revenue also allowed BP to sharply reduce its debt to $22.8 billion from $27.5 billion at the end of March.
GREAT OIL BONANZA
BP lifted the second-quarter profit of major Western oil and gas companies to $59 billion after rivals Exxon Mobil ( XOM.N ) and Shell ( SHEL.L ) posted record earnings last week. Read more
Its underlying replacement cost benefit, its definition of net earnings, hit $8.45 billion in the second quarter, the highest since 2008 and far beating analysts’ expectations of $6.8 billion.
That was up from $6.25 billion in the first quarter and $2.8 billion a year earlier.
The strong performance was driven by strong refining margins, “exceptional” performance in oil trading and higher fuel prices, although gas trading was weaker, BP said.
An outage at a major liquefied natural gas (LNG) plant on the US Gulf Coast also weighed on profits.
The Freeport LNG plant supplies BP with 4 million tonnes of LNG per year, out of a total portfolio of 18 million tonnes.
BP is looking at ways to supply customers despite the loss of supply, although this will come at a high cost, Chief Financial Officer Murray Auchincloss told Reuters.
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The company has set aside money to cover additional LNG supply costs as a result of the Freeport outage, he said.
Jefferies analysts estimated that these additional costs this quarter would total between $700 million and $900 million.
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Report by Ron Bousso and Shadia Nasralla; edited by Jason Neely
Our standards: the Thomson Reuters Trust Principles.