Energy giant BP has increased its quarterly dividend by 10% and committed to additional share buybacks in the second half of the year.
Shareholder distributions will be in focus after profit growth grew marginally and cash generation jumped compared to the last quarter. BP has announced an underlying replacement cost (RC) profit of $2.8 billion for the second quarter of 2024, a slight increase from $2.7 billion in the previous quarter.
Stronger downstream fuel margins and lower taxation bolstered the company’s profitability amid lower oil prices. Although BP had areas of strength, gains were partially offset by significantly lower realised refining margins and an average gas marketing and trading result.
BP, like many other oil majors, has been through a period of adjustment as energy prices normalised after a prolonged elevation due to Russia’s invasion of Ukraine.
In the gas and low-carbon energy segment, BP reported an underlying RC profit before interest and tax of $1.4 billion. This represents a decrease from the previous quarter’s $1.7 billion, primarily due to average gas marketing and trading results. The absence of foreign exchange losses from the Egyptian pound devaluation and lower exploration write-offs partially mitigated this decline.
Oil production and operations maintained steady performance, with an underlying RC profit before interest and tax of $3.1 billion. Higher realisations were balanced by increased exploration write-offs, resulting in a figure identical to the previous quarter.
The customers and products segment saw mixed results. While the customers division improved by $0.4 billion due to stronger fuels margins and improved convenience store performance, the products division declined by $0.6 billion. This drop was attributed to significantly lower refining margins, particularly in middle distillates, and narrower North American heavy crude oil differentials.
Despite the underlying profit, BP reported a $0.1 billion loss for the quarter on a net basis. This was due to inventory holding losses and significant adjusting items, including a $1.5 billion charge related to asset impairments and onerous contract provisions. The ongoing review of the Gelsenkirchen refinery contributed to these adjustments.
“We generated strong operating cash flow* in the quarter, which helped reduce net debt* to $22.6 billion,” said Kate Thomson, BP’s CFO.
“Our decision to increase our dividend by 10%, and extend our buyback programme commitment to 4Q 2024, reflects the confidence we have in our performance and outlook for cash generation. We are maintaining a disciplined financial frame and remain committed to growing value and returns for bp.”