BP raises dividend despite 70% profit drop

BP increased its dividend and announced more share buybacks even as earnings slumped 70 per cent from the record levels set last year.

The UK-listed energy major was the last of the large western oil and gas groups to report half-year results. Each company published a similar decline in quarterly earnings, although BP’s fell furthest, shrinking more than two-thirds to $2.6bn, down from the $8.5bn it recorded in the same period last year.

Earnings at ExxonMobil and Shell were both down 56 per cent on last year, while TotalEnergies’ earnings plunged 49 per cent.

BP chief executive Bernard Looney blamed lower refining margins and a “very high level” of planned maintenance work for the drop as the upheaval in energy markets that had supercharged profits for the previous five quarters receded.

Brent crude, the global oil benchmark, averaged $78 a barrel between April and June compared with $114 a barrel in the same period last year.

Despite the fall in earnings, which missed analysts’ expectations by almost $1bn, BP surprised investors by increasing the dividend by 10 per cent to $0.70 per share.

It also committed to another $1.5bn in share repurchases this quarter, following $4.5bn in share buybacks already announced and completed this year. BP shares were up 1.5 per cent in morning trading in London.

BP, like its rivals, has used record profits in the past 18 months to buy back billions of dollars of its own stock, allowing it to reduce the outstanding number of shares by more than 9 per cent over the previous four quarters. “That allows us to raise the dividend by 10 per cent and effectively leave the dividend burden unchanged,” Looney said.

While the fall in oil and gas prices meant it was a “very, very different environment” compared with 2022, Looney expected robust oil demand and supply cuts by the Opec cartel and its allies to support prices for the rest of the year.

“When you look at the oil markets, demand is incredibly strong,” Looney said. “That coupled with [the] very strong discipline . . . we’re seeing from Opec+ . . . all leads to a world where prices are likely to be constructive in the months and year ahead.”

BP’s net cash flow was negative for the quarter at $269mn, meaning it had to borrow to meet its spending obligations. Net debt went up for the first time in 12 quarters to $23.7bn, rising from $21.2bn in March.

Biraj Borkhataria, an analyst at RBC Capital Markets, said he would have preferred the company to reduce net debt and delay the dividend increase to later in the year.

Chief financial officer Murray Auchincloss said net debt had risen, in large part due to the $1.3bn acquisition in May of TravelCenters of America, a chain of US highway fuel stations where BP plans to roll out EV charging. The business would add $800mn of new earnings before interest tax and depreciation and amortisation by 2025, Auchincloss said. “Sometimes it’s good for debt to go up.”

Looney said he supported recent signals from the UK government that it would continue licensing new oil and gasfields in the North Sea, even as it seeks to reduce the country’s dependence on fossil fuels. Critics have accused the government of backsliding on previous green commitments.
BP would continue to “invest responsibly” into oil and gas in the North Sea, at the same time as it develops new clean energy solutions for the UK, Looney added.

“We believe the world needs a rapid transition and an orderly transition,” he said. “If we don’t have an orderly transition, supply won’t match demand.”