(Bloomberg) — BP Plc maintained the pace of share buybacks and raised its dividend, as strong second-quarter profits from pumping crude offset weakness in other parts of the business.
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In a bid to secure the future of its profitable upstream division, BP also greenlit the Kaskida oil project in the US Gulf of Mexico, potentially the first in a series of new developments in the region. The company, which has embraced the clean energy transition more vigorously than most of its peers, expects fossil fuel production to grow this year.
The British oil giant reiterated that it will buy $3.5 billion worth of shares until the end of this year, while raising its dividend by 10% to 8 cents per share as expected. Investor returns were supported by declining net debt and healthy operating cash flow, which was almost 30% higher than a year earlier.
Shares rose 1.9% to 461.45 pence at 9.48am in London on Tuesday.
BP and its European peers make more money from oil production as OPEC+ production cuts support prices, but they make less from refining because of greater competition from imports. Last week, France’s TotalEnergies SE reported a profit drop due to weaker margins on fuel processing. This trend appears set to continue in the third quarter, with margins remaining “sensitive” to shifts in supply costs, according to BP.
The dividend confirmation and buybacks should be taken “positively” while the reduction in net debt also increases investment opportunities, RBC analyst Biraj Borkhataria said in a note.
BP’s adjusted net income for the second quarter was $2.76 billion, better than the average analyst estimate of $2.69 billion.
“We are driving focus across the company and reducing costs,” CEO Murray Auchincloss said in a statement. “All this supports growing returns for shareholders.”
Kaskida, which should start operating in 2029, will produce as much as 80,000 barrels per day from high-pressure fields deep beneath the seabed in the Paleogene geological zone, one of several potential developments in the region.
The decision to proceed with the project underlines BP’s shift towards oil and gas, with less emphasis on rapidly decarbonising the business.
Under Auchincloss, who was formally appointed to the role early this year, BP has said its net-zero target remains unchanged but the trajectory will be different from that of his predecessor, Bernard Looney.
A refocus on oil and gas would reflect the course of Wael Sawan, the CEO of nearest competitor Shell Plc. BP said it will provide an update on its medium-term strategy in February.
–With help from Will Kennedy.
(Updates with analyst commentary in sixth paragraph.)
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