BP’s profit jumps on higher oil prices and increased output
HIGHER oil prices and increased output helped BP to quadruple its second-quarter profit from a year earlier, as the oil major finally shakes off the after-effects of 2010’s Deepwater Horizon spill and the last oil-market slump.
Second-quarter results have been a mixed bag for the world’s top oil companies. Total beat forecasts and boosted production targets, while Royal Dutch Shell launched a $25 billion (R329.23bn) share-buyback programme, despite profits falling short of expectations.
US majors Exxon Mobil and Chevron disappointed Wall Street.
BP confirmed that it would increase its quarterly dividend for the first time in nearly four years, offering 10.25 cents a share, an increase of 2.5 percent. It bought back shares to the tune of $200 million in the first half.
In a further sign of recovery, BP last week agreed to buy US shale oil and gas assets from BHP Billiton for $10.5bn.
The deal, BP’s first major acquisition in 20 years, marked a watershed for the company in the US, as it looks to leave behind the $65bn fallout from the deadly explosion of its Deepwater Horizon rig in the Gulf of Mexico.
Benchmark Brent crude futures, currently above $74 a barrel, rose about 16 percent in the first half of this year and are up about 60 percent since June last year.
BP’s output in the first six months of the year was 3.662 million barrels of oil equivalent (boe) a day, including production at Russia’s Rosneft, of which it owns just under a fifth, from 3.544 million boe a day a year earlier. This helped underlying replacement-cost profit, BP’s definition of net income, to rise to $2.8bn, exceeding forecasts of $2.7bn.
It earned $0.7bn a year earlier and $2.6bn in the first quarter.
BP has paid about $2.4bn of expected 2018 costs of just more than $3bn related to Deepwater Horizon, and plans to split the outstanding payments equally between the third and fourth quarters, chief financial officer Brian Gilvary said.
Meanwhile, the company has tightened its investment budget for this year to about $15bn from up to $16bn and increased its divestment guidance to more than $3bn from $2bn to $3bn.
Gearing, the ratio between debt and BP’s market value, declined to 27.8 percent at the end of the quarter from 28.1 percent at the end of March. Net debt was $39.3bn at the end of June, compared with $40bn at the end of March.
“With gearing nudging down sequentially, dividends raised and execution on track, quarter one and quarter two are the start of a new positive trend for BP,” Bernstein analyst Oswald Clint said. – Reuters