Strong refining margins and trading encouraged BP to enhance its dividend and expenditure on new oil and gas production, resulting in a second-quarter profit of $8.45 billion, its largest in 14 years.
As a result of skyrocketing energy costs, which have raised pressure on governments to levy new levies on the sector to aid consumers, the biggest Western oil and gas firms have just completed a record-breaking quarter.
“The firm is operating effectively and continues to grow. We enjoy genuine strategic momentum, “Bernard Looney, chief executive officer, told Reuters.
BP (NYSE:BP) shares increased by 3.6% at the start of trading in London.
In response to the worldwide supply bottleneck, Looney, who assumed office in 2020 with a pledge to swiftly transition BP away from fossil fuels to renewables, announced a $500 million boost in investment on new oil and gas.
Looney stated, “We will spend more on hydrocarbons to improve energy security in the foreseeable future.” We will likely invest around $500 million in hydrocarbons.
This year, BP expects to keep its total capital expenditures between $14 billion and $15 billion.
BP upped its dividend by 10 percent to 6.006 cents per share, above its earlier forecast for an annual rise of 4 percent. In the aftermath of the epidemic, it lowered its dividend to 5.25 cents in July 2020 for the first time in a decade.
After purchasing $4,1 billion in the first half of the year, the business boosted its share repurchase plan for the current quarter to $3.5 billion.
The business stated that it anticipates crude oil and gas prices, as well as refining margins, to remain “elevated” in the third quarter and that it will adhere to its goal of repurchasing 60 percent of its excess cash.
BP was also able to drastically cut its debt from $27.5 billion at the end of March to $22.8 billion due to the increase in income.
BIG OIL BONANZA
After rivals including Exxon Mobil (NYSE:XOM) and Shell (LON:RDSa) reported record earnings last week, BP pushes the second-quarter profit total for the big Western oil and gas corporations to $59 billion.
Its underlying replacement cost profit, its measure of net profitability, was $8.45 billion in the second quarter, the highest since the second quarter of 2008 and considerably above analysts’ projections of $6.50 billion.
This was an increase over the first quarter’s $6.25 billion and the prior year’s $2.8 billion.
Positive refining profits, “outstanding” oil trading performance, and higher fuel prices drove the strong result, BP claimed, but gas trading was worse.
Profits were impacted by an outage at a large liquefied natural gas (LNG) plant on the Gulf Coast of the United States.
BP receives 4 million tonnes of LNG annually from the Freeport LNG project, out of a total portfolio of 18 million tonnes.
Chief Financial Officer Murray Auchincloss told Reuters that the business was able to shift shipments to clients to make up for the missed supply, although at a higher cost that impacted profitability.
As a result of the Freeport outage, the business has earmarked funds to meet the additional expenses of LNG delivery, he added.