LONDON, August 2 (Reuters) – BP (BP.L) Second-quarter profit jumped to $8.45 billion, a 14-year high, as strong refining margins and trading pushed up dividends and spending on new oil and gas production.
The strong performance covers a huge quarter for the largest Western oil and gas companies on the back of high energy prices that have increased pressure on governments to impose new taxes on the sector to help consumers.
“The company is doing well and continues to strengthen. We have real strategic momentum,” Reuters CEO Bernard Looney said.
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BP shares rose 4.3% by 1315 GMT, hitting their highest levels since June and solidly outperforming the European Energy Index. (.SXEP) which was up 0.7%. BP shares have gained 23% this year but are still about 10% below pre-pandemic levels.
Looney, who took office in 2020 with a pledge to shift BP away 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 crunch. Read more
“We will direct more investment towards hydrocarbons to help energy security in the near term,” Looney said. “It is possible that we will allocate about half a billion dollars to hydrocarbons.”
BP plans to keep its total capex this year in the range of $14 billion to $15 billion.
BP raised its dividend 10% to 6,006 cents a share, more than its previous guidance for 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 raised its stake repurchase plan for the current quarter to $3.5 billion, after it bought $4.1 billion in the first half of the year.
“The fact that the company posted 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 it was,” said Ross Mold, chief investment officer at AJ Bell. In the previous”.
The company said it expects crude oil and gas prices as well as refining margins to remain “high” in the third quarter and said it would stick to its goal of using 60% of its surplus cash for share buybacks.
The British Petrol BP e logo is seen at a gas station in Pienkow, Poland, June 8, 2022. REUTERS/Kacper Pempel
The increase in revenue also allowed BP to reduce its debt sharply to $22.8 billion from $27.5 billion at the end of March.
BIG OIL BONANZA
BP raises the second-quarter profit of the largest Western oil and gas companies to 59 billion dollars, after competitors, including Exxon Mobil (XOM.N) paralyze (coincidence) Reported record earnings last week. Read more
Basic replacement cost earnings, defined as net profit, were $8.45 billion in the second quarter, the highest level since 2008 and well above analysts’ expectations of $6.8 billion.
That was up from $6.25 billion in the first quarter and $2.8 billion a year earlier.
BP said the strong performance was driven by strong refining margins and an “exceptional” oil trading performance as well as higher fuel prices, despite weak gas trading.
The outage at a major LNG plant on the US Gulf Coast also affected earnings.
The Freeport LNG plant supplies BP with 4 million tons per year of LNG, out of a total portfolio of 18 million tons.
The company’s chief financial officer, Murray Ochenclus, told Reuters that BP was looking at ways to supply customers despite the supply losses, although that would come at a high cost.
He said the company had set aside funds to cover the additional costs of supplying LNG as a result of the Freeport outage.
Jefferies analysts estimated that these additional costs this quarter will range from $700 million to $900 million.
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(Reporting by Ron Bousso and Shadia Nasrallah). Editing by Jason Neely
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