BP raises dividend despite earnings drop

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

The group’s underlying profits for the second quarter were $2.6bn, down almost 70 per cent from the $8.5bn it recorded in the same period last year and missing analysts’ expectations of $3.5bn by almost $1bn.

BP blamed lower refining margins and planned maintenance work for the drop in performance as the upheaval in energy markets that had supercharged earnings for the previous five quarters receded.

The UK-listed energy major was the last of the large western oil and gas companies to report their half-year results.

Each company suffered a similar decline in profits as oil and gas prices fell over the quarter. 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.

Profits at ExxonMobil and Shell were both down 56 per cent on last year, while TotalEnergies earnings shrank by 49 per cent.

Despite the decline in profits, chief executive Bernard Looney said BP was “delivering for shareholders” as he increased the dividend by 10 per cent to $0.70 per share and committed to $1.5bn in share repurchases this quarter. That follows $4.5bn in share buybacks already announced and completed this year.

“Our underlying performance was resilient with good cash delivery — during a period of significant turnaround activity and weaker margins in our refining business,” Looney said.

Chief financial officer Murray Auchincloss said BP would continue to return 60 per cent of 2023 surplus cash flow through share buybacks. The company has already reduced its share count by more than 9 per cent between April 2022 and March 2023, it said. Repurchases have left fewer in circulation, boosting earnings per share.

BP’s net cash flow was negative for the quarter at $269mn, meaning it had to borrow to meet its spending obligations. Net debt rose to $23.7bn, compared with $21.2bn the previous quarter.

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

Unlike Shell, which trimmed its capital expenditure plans this quarter, BP left its 2023 spending guidance unchanged at $14bn-$18bn.