BP confidently pursues growth as earnings jump and debt falls
To woo shareholders, BP raised its dividend payout last week for the first time since 2014
BP Plc churned out more profit than expected in the second quarter, offering reassurance to investors about its financial strength after announcing its biggest deal in almost two decades.
Avoiding the earnings disappointments that dogged rivals Royal Dutch Shell Plc and Exxon Mobil Corp, BP said it was confidently pursuing growth again.
After spending much of the past eight years shaking off the impact of the fatal Gulf of Mexico oil spill and a deep industry downturn, chief executive officer Bob Dudley said he would build upon all that hard work with the $10.5 billion (Dh38.5 billion) acquisition of US shale assets.
“We’ve turned around and retooled the company over seven years,” Dudley said in a Bloomberg Television interview. “It shows more confidence than we’ve had in a long time.”
To woo shareholders, BP raised its dividend payout last week for the first time since 2014, while also pledging to hold annual spending steady, continue stock repurchases and keep debt at manageable levels. That effort was reinforced yesterday by the company’s fourfold increase in second-quarter profit.
“The earnings justify the acquisition,” said Iain Armstrong, an analyst at Brewin Dolphin Ltd, which owns BP shares.
“Cash continues to be strong and pressure from the Gulf of Mexico payments is easing.”
BP’s profit adjusted for onetime items and inventories was $2.82 billion, higher than analysts’ estimate of $2.66 billion.
Cash flow from operations, excluding payments related to the Gulf of Mexico spill and including a working capital release, was $7 billion compared with $6.9 billion a year earlier. Gearing, the ratio of net debt to capital, dropped to 27.8 per cent from 28.8 per cent a year ago.
“Debt has come down, and it will continue to trend as the year progresses” because the bulk of this year’s payments for the Gulf of Mexico oil spill are already made, chief financial officer Brian Gilvary said.