A view of the BP logo and petrol station forecourt sign in Southend, England, on January 22, 2024.
John Keeble | Getty Images News | Getty Images
British oil giant BP reported better-than-expected second-quarter profit on Tuesday and boosted its dividend despite earlier warnings that refining margins would be significantly lower.
The oil and gas giant reported $2.8 billion in basic replacement cost gains, a proxy for net income, in the second quarter, beating analysts’ expectations of $2.6 billion, according to consensus estimates compiled by LSEG.
BP reported net profit of $2.7 billion for the first three months of this year and $2.6 billion for the second quarter of 2023.
The energy company announced it was raising its dividend by 10% to 8 cents per share from 7.27 cents per share. It also maintained the portion of its share repurchase program at $1.75 billion over the next three months.
BP’s chief financial officer, Kate Thompson, said on Tuesday the company’s decision to boost shareholder returns “reflects our confidence in our performance and outlook for cash generation.”
BP said earlier this month that weak refining margins and weak oil trading performance could cut its second-quarter earnings by as much as $700 million. The company confirmed on Tuesday a $1.5 billion write-down as it plans to scale back refinery operations at its Gelsenkirchen, Germany, facility.
“We are focusing and reducing costs across our business while building momentum to 2025,” BP CEO Murray Auchincloss said in a statement.
“Our recent approval of the Kaskida development in the Gulf of Mexico, our decision to acquire full ownership of bp Bunge Bioenergia and scale back our plans for new biofuels projects demonstrate our commitment to operating as a simpler, more focused and higher value company,” he added.
BP’s net debt was $22.6 billion at the end of the second quarter, down $23.7 billion from the same period last year.
Shares in the London-listed company were up 1.9% on Tuesday morning.
BP’s shares have fallen about 2.8% since the start of the year. By comparison, shares of its British rivals have husks The stock is up nearly 8% so far this year, and shares of U.S. oil giant ExxonMobil have jumped more than 16%.
Investor confidence
BP’s second-quarter results came as the company sought to restore investor confidence in its strategy.
Analysts at RBC Capital Markets said BP reported “resilient” second-quarter results, with “a slight increase in bottom line earnings, primarily due to a lower-than-expected tax rate.”
They added that BP’s dividend increase was at the top end of market expectations and that the reduction in net debt was “to be welcomed” given that rising net debt had been seen as a problem in BP’s investment case.
In recent months, BP has come under pressure from activist investor Bluebell Capital Partners to increase its oil and gas investments and scale back its environmental commitments.
Under the leadership of Bernard Looney, who resigned in September after less than four years in office, BP pledged to cut overall emissions by 35-40% by the end of the decade.
The company, which was one of the first energy giants to announce plans to cut emissions to net zero “by 2050 or sooner,” has since watered down its climate plans. In its strategy update last year, BP said it would instead aim for a 20-30% cut, noting it would need to continue investing in oil and gas to meet demand.
Reuters reported in late June that BP CEO Murray Auchincloss had implemented a hiring freeze and halted renewable energy projects as part of a cost-cutting plan to boost profits. BP said at the time that Auchincloss had introduced six priorities to “deliver a simpler, more focused and more valuable company.”
Shell is scheduled to report second-quarter results on Thursday, with ExxonMobil and Chevron following suit on Friday.
Norwegian oil and gas producer Equinor reported on Wednesday a 4% drop in second-quarter profit, beating analysts’ expectations.
