- Profits rose to $8.45 billion, far beating estimates
- BP increases dividend by 10%
- BP to increase oil and gas spending, CEO says
- Earnings driven by strong oil trade hit by LNG
LONDON, Aug 2 (Reuters) – BP’s ( BP.L ) second-quarter profit jumped to $8.45 billion, a 14-year high, as strong refining and trading margins prompted it to increase dividends and the costs of new oil and gas production.
The strong performance capped a blowout quarter for top Western oil and gas companies amid rising energy prices that increased pressure on governments to impose new taxes on the sector to help consumers.
“The company is performing well and continues to strengthen. We have real strategic momentum,” Chief Executive Bernard Looney told Reuters.
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BP shares rose 4.3 percent by 13:15 GMT, hitting their highest level since June and strongly outperforming the European energy index ( .SXEP ), which was up 0.7 percent. BP shares have gained 23% this year but are still about 10% below pre-pandemic levels.
Looney, who took office in 2020 with a promise to quickly shift BP from fossil fuels to renewables, said the company would increase spending on new oil and gas by $500 million in response to the global supply crisis. Read more
“We’re going to put more investment into hydrocarbons to help with energy security in the near term,” Looney said. “We’re probably going to put about half a billion dollars into hydrocarbons.”
BP plans to keep its total capital spending this year in the range of $14 billion to $15 billion.
BP increased its dividend by 10% to 6.006 cents per share, more than 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 following 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 made 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 it was before,” said the investment director of AJ Bell Russ Mold.
The company said it expected crude oil and gas prices and refining margins to remain “elevated” in the third quarter and said it would stick to its target of using 60% of its surplus to buy back shares.
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The British Petrol BP logo is seen at a gas station in Pienkow, Poland, June 8, 2022. REUTERS/Kacper Pempel
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The revenue growth also allowed BP to sharply reduce its debt to $22.8 billion from $27.5 billion at the end of March.
LARGE BUTTER BONANZA
BP took the second-quarter profits of top 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
Its core earnings from replacement costs, its definition of net earnings, came in at $8.45 billion in the second quarter, the highest since 2008 and far beating analysts’ expectations of $6.8 billion.
That’s 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, an “outstanding” performance in oil trading as well as higher fuel prices, although gas trading was weaker, BP said.
An outage at a major liquefied natural gas (LNG) plant on the US coast also weighed on earnings.
The Freeport LNG plant supplies BP with 4 million tonnes per year of LNG from a total portfolio of 18 million tonnes.
BP is looking for ways to supply its customers despite the supply loss, but it will come at a higher cost, Chief Financial Officer Murray Occhinlos told Reuters.
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The company has set aside money to cover additional LNG shipping costs as a result of the Freeport outage, he said.
Jefferies analysts estimated that these additional costs this quarter would amount to $700 million to $900 million.
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Reporting by Ron Busso and Shadia Nasrallah; editing by Jason Neely
Our standards: The Thomson Reuters Trust Principles.
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