BP Second Quarter Profits Highest In 14 Years

BP Second Quarter Profits Highest In 14 Years
BP has decided to raise its dividend and boost share buybacks after second-quarter profits hit a 14-year high due to higher refining margins and trading.

Oil supermajor BP has decided to raise its dividend and boost share buybacks after tripling second-quarter profits due to higher refining margins and trading.

BP said that underlying replacement cost profit was $8.5 billion, compared with $6.2 billion for the previous quarter. To clarify things, underlying replacement cost profit is used as a proxy for net profit. The profit for the quarter is BP’s highest in 14 years, just as other Big Oil firms mostly hit records in the profit-mighty 2008 – until this unprecedented year.

According to the British firm, this was driven by strong realized refining margins, continuing exceptional oil trading performance, and higher liquids realizations. This was partly offset by an average gas marketing and trading contribution, down from the exceptional result in the first quarter, including an impact from the ongoing outage at Freeport LNG.

The profit for the quarter was $9.3 billion, compared with a loss of $20.4 billion for the first quarter of 2022. The reported result for the second quarter includes a charge for adjusting items before tax of $0.3 billion within which are adverse fair value accounting effects of $0.8 billion.

The first quarter loss included a post-tax charge of $24.4 billion relating to BP's decision to exit its 19.75 percent shareholding in Rosneft and its other businesses with Rosneft in Russia.

Operating cash flow in the quarter of $10.9 billion includes $1.2 billion of Gulf of Mexico oil spill payments within a working capital build of $2.9 billion. During the second quarter, BP executed share buybacks of $2.3 billion. The company added that net debt fell for the ninth successive quarter to reach $22.8 billion at the end of the second quarter.

During the second quarter, BP generated a surplus cash flow of $6.6 billion and intends to execute a $3.5 billion share buyback before announcing its third-quarter results. The firm also announced share buybacks from 2021 and the first-half 2022 surplus cash flow equivalent to 60 percent of the cumulative surplus cash flow.

For 2022 and subject to maintaining a strong investment grade credit rating, BP remains committed to using 60 percent of surplus cash flow for share buybacks and intends to allocate the remaining 40 percent to further strengthen the balance sheet.

As for projects, BP has strengthened its renewal options by partnering with Petrobras in a successful Drill Stem Test at the Cabo Frio discovery in the Campos Basin offshore Brazil and participating in the Timpan-1 discovery offshore Indonesia. BP continues to high-grade its portfolio, agreeing to acquire a 35 percent interest in the undeveloped Bay du Nord discovery offshore Canada as part of the transaction to sell its 50 percent interest in the Sunrise oil sands project.

“Today’s results show that bp continues to perform while transforming. Our people have continued to work hard throughout the quarter helping to solve the energy trilemma – secure, affordable, and lower carbon energy. We do this by providing the oil and gas the world needs today – while at the same time, investing to accelerate the energy transition,” Bernard Looney, chief executive officer of BP, said.

To contact the author, email bojan.lepic@rigzone.com

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