1st Aug 2023 14:10
(Alliance News) - BP PLC on Tuesday managed to win investors over with a USD1.5 billion share buyback programme and higher dividend, after its quarterly profit dived.
"BP was in the mood for share buybacks, saying it would spend up to USD1.5 billion on the activity up to the end of October. That announcement, together with news of a 10% dividend hike, was enough to please investors and shift the attention away from a big fall in second quarter profits," said AJ Bell's Laith Khalaf.
Second quarter attributable profit came in at USD1.79 billion, down considerably from USD9.26 billion a year earlier and from USD8.22 billion in the first quarter of 2023. However, in the first half of 2023, it swung to a profit of USD10.01 billion from a loss of USD11.13 billion a year prior.
Underlying replacement cost profit in the quarter fell to USD2.59 billion, down from USD8.45 billion year-on-year and USD4.96 billion in quarter one.
The average realised price for oil was USD70.40 per barrel of oil in the first half of 2023, down 23% from USD92.00 a year ago and 12% lower than what BP said was the average oil market price of USD79.66 per barrel.
The oil major declared a second quarter dividend of 7.27 US cents, up 10% from 6.61 cents a year ago. This brings the half-year dividend to 13.88 US cents, up 21% from 11.466 cents a year ago.
BP said the second quarter was resilient with good cash delivery amid turnaround activity and weak refining margins.
It also announced that a new share buyback programme will be completed before reporting third quarter results. The buyback will be for a further USD1.5 billion shares, down slightly from the USD1.75 billion share buyback just completed.
Steve Clayton, head of equity funds at Hargreaves Lansdown, said the dividend and buyback show that BP remains "confident enough in the outlook", despite lower quarterly figures.
"BP's move to boost shareholder returns is in line with moves by some of the other leading oil producers as they focus on ensuring investors benefit from the strength of cash flow the industry is currently enjoying," Clayton added.
On Thursday last week, British Gas owner Centrica PLC extended its share buyback programme by GBP450 million, having bought back GBP340 million shares over the first half of 2023.
On the same day, oil major Shell announced another USD3 billion share buyback programme.
Speaking about the buyback, Hargreaves Lansdown's Derren Nathan said: "It was pleasing to see this come without a cut to guidance on capital investment."
Looking ahead, BP said it expected reported and underlying upstream production in 2023 to be higher than in 2022, amid USD4.0 billion per year in buybacks.
The company was optimistic to be supported by seasonal demand and output restrictions by OPEC+ countries in the third quarter.
Further, in the third quarter the company anticipates industry refining margins to stay above historical average levels, boosted by seasonal demand in the US and due to low product inventories.
BP shares were 1.6% higher at 490.50 pence each in London on Tuesday afternoon.
By Sophie Rose, Alliance News reporter
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