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BP raises dividend after profits hit 14-year high

BP raises dividend after profits hit 14-year high
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  • Profit rose to $8.45 billion, well ahead of forecasts
  • BP increased dividend by 10%
  • CEO says BP will increase oil and gas spending
  • Profits stemming from strong oil trading have been hit by LNG

LONDON, Aug 2 (Reuters) – BP (BP.L) second-quarter profit rose to $8.45 billion, a 14-year high, as strong refining margins and trading prompted it to increase its dividend and spending on new oil and gas production.

The strong performance caps a quarter for top Western oil and gas companies amid rising energy prices that have increased pressure on governments to introduce new taxes on the sector to help consumers.

“The company is performing well and continues to grow. We have real strategic momentum,” Chief Executive Bernard Looney told Reuters.

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

Looney, who took office in 2020 on a promise to shift BP away from fossil fuels and toward renewables, said the company would increase spending on new oil and gas by $500 million in response to the global supply crisis. read more

“We’re going to invest more in hydrocarbons to help with energy security in the near term,” Looney said. “We’re probably going to spend about half a billion dollars on hydrocarbons.”

BP plans to keep total capital spending between $14 billion and $15 billion this year.

BP increased its dividend by 10% to 6,006 cents per share, up from a 4% increase in the previous year. It cut its dividend in half to 5.25 cents in July 2020 for the first time in a decade since the pandemic.

The company also increased its share buyback plan for the current quarter to $3.5 billion, after buying $4.1 billion in the first half of the year.

“The fact that it posted its highest quarterly profit in 14 years shows that BP is a more efficient machine than it has been, even though oil prices were higher during that period,” said Russ Mold, chief investment officer at AJ Bell.

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

Reuters graphics

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

THE GREAT OIL BONANZA

BP led the West’s largest oil and gas companies in second-quarter profits to $59 billion, trailing rivals including Exxon Mobil. (XOM.N) and Shell (SHEL.L) reported record earnings last week. read more

Its underlying replacement cost profit, its net profit, rose to $8.45 billion in the second quarter, the highest since 2008 and well above analysts’ expectations of $6.8 billion.

That was up from $6.25 billion in the first quarter and up from $2.8 billion a year earlier.

BP said the strong performance was driven by strong refining margins, “exceptional” performance in oil trading and higher fuel prices, although gas trading was weaker.

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

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

Chief Financial Officer Murray Auchincloss told Reuters that BP was looking for ways to supply customers despite the lost supply.

Reuters graphics

According to him, the company has set aside money to cover additional costs of LNG supply as a result of the Freeport outage.

Jefferies analysts had estimated the additional costs would be between $700 million and $900 million this quarter.

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Reporting by Ron Bousso and Shadia Nasralla; Edited by Jason Neely

Our standards: Thomson Reuters Trust Principles.

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