Oil major BP (LON:BP) beat forecasts reporting “strong” profits and a boon for shareholders as confirmed investment in new oil and gas project in the Gulf of Mexico and scaled back plans to develop low carbon jet fuel.
In its second quarter update, BP said its under lying replacement cost profit – it’s preferred measure of profitability – was $2.8bn (£2.18bn) which was an increase on $2.6bn in the same quarter last year.
Hailing “strong operating cash flow and lower net debt”, the company confirmed it was continuing its share buyback programme in an effort to shore up its share price and instil confidence in investors. The firm pledged a $14 billion shares boost through to 2025, including a further $1.75bn cash injection for shareholders in the second quarter, adding to $1.75bn committed in the first quarter of the year.
In an update with little fresh news in the UK, BP highlighted a range of investments it is making in other areas of the world. This included the announcement of a final investment decision (FID) on its 100%-owned Kaskida project in the US Gulf of Mexico.
For fans of sustainable aviation fuel (SAF), BP confirmed it was scaling back plans for development of new SAF and renewable diesel biofuels projects at its existing sites, pausing planning for two potential projects while continuing to assess three for progression.
Overall, the firm said it plans to make capital expenditure of around $16 billion per year in 2024 and 2025.
The firm said capital expenditure in the second quarter was $3.7bn, down from $4.3bn in the same quarter last year.
Looking ahead, said it expects upstream production to be lower in the next quarter. It confirmed that Brent averaged $84.97/bbl in the second quarter 2024 compared to $83.16/bbl in the first quarter 2024.
With no comment made on the UK government’s decision to raise the and extend the energy profits levy, BP did say it expects to pay $1bn more in income tax in Q3 due to “timing instalment payments”.
© BloombergBP CEO Murray Auchincloss: “Our businesses continue to operate safely and efficiently.
“We are driving focus across the business and reducing costs, all while building momentum in our drive to 2025.
“Our recent go-ahead of the Kaskida development in the Gulf of Mexico business, and decision to take full ownership of BP Bunge Bioenergia while scaling back plans for new biofuels projects, demonstrate our commitment to delivering as a simpler, more focused and higher value company.
“This all supports growing returns for shareholders, as we have announced today.”
© Supplied by BPBP chief financial officer Kate Thomson said its outlook was positive : “We generated strong operating cash flow in the quarter, which helped reduce net debt to $22.6 billion.
“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.”
BP also announced a final investment decision (FID) on the Kaskida project in the US Gulf of Mexico.
Kaskida will be BP’s sixth hub in the Gulf of Mexico, featuring a new floating production platform with the capacity to produce 80,000 barrels of crude oil per day from six wells in the first phase. Production is expected to start in 2029.
Gordon Birrell, BP’s executive vice president of production and operations, said: “Developing Kaskida will unlock the potential of the Paleogene in the Gulf of Mexico for BP, building on our decades of experience in the region.
“Technology has and will continue to play a pivotal role in propelling Kaskida from discovery to production. Together with the other resources we have in the Paleogene, we expect it to prove to be a world-class development. Today is a critical step in realizing its potential.”
Owned 100% by BP, the Kaskida field has discovered recoverable resources currently estimated at around 275 million barrels of oil equivalent from the initial phase.
John Moore, senior investment manager at RBC Brewin Dolphin, said: “BP has beaten forecasts, despite previous warnings about lower refining margins and a weakening oil price over the last quarter.
“The energy major is maintaining capital discipline and cutting debt, with a strong level of cash generation helping to boost shareholder returns.
“A persistent global energy undersupply should continue to set a supportive backdrop for BP, but longer term the question remains how the company will transition to net zero, with the pace and scale of change and capital investment that will require.”
French energy firm TotalEnergies (PA:TTE) was the first Western oil major to report first-half results last week. It reported “modestly disappointing” results including a 6% fall in second-quarter earnings, hurt by lower refined product and gas sales and as European refining margins tumbled.
UK’s Shell (LON: SHEL) will report its second quarter results on 1 August.
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