BP this morning said it will increase its dividend by 4 per cent and will kick off $1.4bn worth of share buybacks after its profit sprinted past estimates and rose to $28bn in the second quarter, buoyed by higher oil and gas prices.
The oil giant raised its dividend to 5.46 cents, beating analysts’ expectations of a repeat of the first quarter’s 5.25 cents per share dividend. This represented a recovery from the pandemic slump that halfed its dividend to the 5.25 cents amount in July last year, for the first time in a decade.
British BP went against analysts’ grimmer forecast and followed rivals Shell, Chevron and TotalEnergies in boosting shareholder returns – in a sign that the demand for energy was recovering after its pandemic lows.
Underlying replacement cost (RC) profit, BP’s preferred metric, was $2.8bn in the second quarter, up from $2.6bn in the first and far in front of analysts’ expectations of $2.15bn. It also marks a significant recovery from its loss of $6.68 billion in the same period last year, when it took large non-cash charges.
London-based BP also revealed plans to repurchase $1.4bn in the next few months, after it generated a surplus of $2.4bn cash over the first half of the year.
BP said it would continue to generate surplus cash over the rest of the year if oil prices were above $60 per barrel, and the company expects to deliver buybacks of around $1bn per quarter and have capacity for an annual increase in the dividend of around 4 per cent until 2025.
“We are a year into executing bp’s strategy to become an integrated energy company and are making good progress – delivering another quarter of strong performance while investing for the future in a disciplined way,” said chief executive Bernard Looney.
“This shows we continue to perform while transforming BP – generating value for our shareholders today while we transition the company for the future.”
BP’s reduced its net debt to $32.7 billion from $33.6bn in the previous quarter.
“The company could slim down faster given that it needs to be in fighting form to make the right investments when the roaring twenties of higher oil prices comes to an end as the world accelerates towards a low carbon future,” said Susannah Streeter, senior investment and markets analyst at Hargreaves.
“The short-to-medium-term investment case for BP is improving each quarter, particularly now it has returned to dividend growth and has announced a generous share buyback offer,” said Mark Crouch, analyst at investment platform eToro.
“However, looking even further ahead, it still feels as though investors are not completely sure that BP can successfully make the transition to a clean energy future,” Crouch added.