BP raises dividend after profits are 14 years high

  • Profit soars to $8.45 billion, way ahead of expectations
  • BP raises dividend by 10%
  • BP increases spending on oil and gas, CEO says
  • Profit driven by strong oil trade, hit by LNG

LONDON, Aug. 2 (Reuters) – BP’s (BP.L) second-quarter profit rose to $8.45 billion, a 14-year high, as strong refining margins and trading caused it to cut its dividend and spending for new oil and gas production.

The strong performance caps a hit quarter for the top western oil and gas companies as soaring energy prices have increased pressure on governments to impose new taxes on the sector to help consumers.

“The business is doing well and it continues to strengthen. We have real strategic momentum,” Chief Executive Officer Bernard Looney told Reuters.

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Shares of BP were up 4.3% at 1315 GMT, reaching their highest level since June and strongly outperforming the European Energy Index (.SXEP), which rose 0.7%. Shares of BP are up 23% this year but are still about 10% below pre-pandemic levels.

Looney, who took office in 2020 with a vow to quickly shift BP from fossil fuels to renewables, said the company will increase its spending on new oil and gas by $500 million in response to the global supply crisis. read more

“We will be investing more in hydrocarbons in the near term to help with energy security,” Looney said. “We will probably deposit about half a billion dollars for hydrocarbons.”

BP plans to keep its total capital expenditures between $14 billion and $15 billion this year.

BP raised its dividend by 10% to 6,006 cents a share, ahead of its earlier expectation of a 4% annual increase. In the wake of the pandemic, it halved its dividend in July 2020 for the first time in a decade to 5.25 cents.

The company also increased its share buyback plan for the current quarter to $3.5 billion after buying $4.1 billion in the first half of the year.

“The fact that it made its highest quarterly profit in 14 years, even though oil prices were higher during that period than they are now, suggests that BP is a more efficient machine than before,” said AJ Bell investment director Russ Mold.

The company said it expected crude oil and gas prices and refining margins to remain “raised” in the third quarter and said it would stick to its target of using 60% of its surplus cash to buy back its own. shares.

Reuters Graphics

The sharp increase in revenues also enabled BP to sharply reduce its debt to $22.8 billion, from $27.5 billion at the end of March.

BIG OIL BONANZA

BP brings second-quarter profits for major Western oil and gas companies to $59 billion after rivals including Exxon Mobil (XOM.N) and Shell (SHEL.L) reported record profits last week. read more

Underlying profit based on replacement costs, the definition of net profit, reached $8.45 billion in the second quarter, the highest level since 2008, well ahead of analyst 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” oil trading performance and higher fuel prices, although gas trading was weaker, BP said.

A failure 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 tons of LNG per year, out of a total portfolio of 18 million tons.

BP is looking for ways to supply customers despite lost supplies, but that will come at a higher cost, Chief Financial Officer Murray Auchincloss told Reuters.

Reuters Graphics

The company has allocated funds to cover the additional costs of LNG supply resulting from the Freeport outage, he said.

Jefferies analysts estimate that those additional costs would total $700 million to $900 million this quarter.

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Reporting by Ron Bousso and Shadia Nasralla; Edited by Jason Neely

Our Standards: The Thomson Reuters Trust Principles.

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