BP raises dividend after profits hit 14-year high

LONDON, Aug 2 (Reuters) – BP’s (BP.L) Second-quarter profit rose to $8.45 billion, the highest in 14 years, as stronger refining margins and trading prompted it to raise its dividend and spending on new oil and gas production.

The strong performance for top Western oil and gas companies caps an explosive quarter on the back of rising energy prices that have increased pressure on governments to impose new taxes on the sector to help consumers.

“The company is doing well and it’s going strong. We have real strategic momentum,” Chief Executive Officer Bernard Looney told Reuters.

BP shares rose 4.3% by 1315 GMT, hitting their highest level since June and strongly outperforming European energy indexes. (.SXEP) which increased by 0.7%. BP shares have risen 23% this year but are still about 10% below pre-pandemic levels.

Looney, who took office in 2020 on a pledge to rapidly transition BP 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 crisis. Read more

“We will direct more investment toward hydrocarbons to help with energy security in the near term,” Looney said. “We’ll probably indicate about half a billion dollars for hydrocarbons.”

BP plans to maintain its overall capital spending this year at $14 billion to $15 billion.

BP increased its dividend by 10% to 6,006 cents per share, higher than previous guidance of 4% annual growth. 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 increased its share repurchase plan to $3.5 billion for the current quarter after buying back $4.1 billion in the first half of the year.

“It made the highest quarterly profit in 14 years, even though oil prices were higher in that period than they are now, suggesting that BP is a more efficient machine than before,” said Russ Mold, investment director at AJ Bell.

The company said it expects crude oil and gas prices as well as refining margins to remain “improved” in the third quarter and said it will stick to its goal of using 60% of its surplus cash on share buybacks.

The increase in revenue allowed BP to reduce its debt sharply to $22.8 billion from $27.5 billion at the end of March.

Big Oil Bonza

BP brought second-quarter profit to $59 billion for top Western oil and gas companies, behind rivals including Exxon Mobil. (XOM.N) and shells (SHEL.L) Last week reported record earnings. Read more

Its underlying replacement cost profit, its definition of net income, reached $8.45 billion in the second quarter, the highest since 2008 and beating analysts’ expectations of $6.8 billion.

That’s up from $6.25 billion in the first quarter and $2.8 billion a year ago.

The strong performance was driven by strong refining margins, “exceptional” oil business performance as well as higher fuel prices, although gas trading was weak, BP said.

An outage at a major US Gulf Coast liquefied natural gas (LNG) plant also weighed on profits.

The Freeport LNG plant supplies 4 million tons of LNG per year out of a total portfolio of 18 million tons.

BP is looking at ways to supply customers despite the lost supply even though it will come at a higher price, Chief Financial Officer Murray Auchincloss told Reuters.

The company has earmarked money to cover additional costs of LNG supplies resulting from the Freeport outage, he said.

Jefferies analysts estimate that the additional costs will be $700 million to $900 million this quarter.

Reporting by Ron Busso and Shadia Nasrallah; Editing by Jason Neely

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