LONDON, July 30 — A strong increase in oil and gas production helped BP offset weaker crude prices and refining profit to beat second-quarter profit expectations today, lifting its shares.
BP’s result contrasts with Total and Norway’s Equinor, which both reported sharp earning drops, and builds on a steady recovery following deep cost cuts since the 2014 downturn, project start-ups and last year’s US$10.5 billion acquisition of BHP’s US shale assets.
Shares in BP were up 3 per cent at 0836 GMT, compared with a 0.1 per cent gain in the broader FTSE index. BP and rival Royal Dutch Shell kept the blue-chip index in positive territory.
“At the midpoint of our five-year plan, BP is right on target,” Chief Executive Bob Dudley said in a statement.
BP’s underlying replacement cost profit, the company’s definition of net income, reached US$2.8 billion in the second quarter, exceeding a company-provided forecast of US$2.46 billion.
The second-quarter profit was up from US$2.4 billion in the previous quarter.
The results beat expectations for 10 quarters in a row, analysts at Bernstein said.
“Strong volume growth from accretive barrels and seamless execution remains underappreciated,” said Bernstein, which has an “outperform” recommendation on the stock.
The company’s operating cash flow recovered to US$6.8 billion in the quarter from US$5.3 billion in the previous quarter as a result of a one-off working capital release.
BP’s dividend remained unchanged at 10.25 cents per share.
Chief Financial Officer Brian Gilvary said the company would consider raising the dividend towards the end of the year as proceeds from asset sales come through and debt is reduced.
Higher production
Second-quarter production rose to 3.8 million barrels of oil equivalent per day, 4 per cent higher than a year earlier.
BP said it expects third-quarter 2019 reported production to be lower than second-quarter, reflecting maintenance activities as well as the impact of Hurricane Barry on operations in the Gulf of Mexico.
Benchmark Brent crude oil prices in the second quarter averaged around US$69 a barrel, up from US$63 the previous quarter but down from US$74 a barrel a year earlier, BP said.
In the refining and marketing segment, known as downstream, profits dropped due to lower sales and refinery throughput as plants underwent maintenance ahead of a major change in marine fuel standards in 2020.
Global growth in oil demand slowed in the first half of the year to around 1 million barrels per day but has slightly recovered in the second half, CFO Gilvary told Reuters.
Despite the higher profit, BP’s debts rose in the first half of the year to US$46.5 billion from US$38.7 billion the previous year, mostly as a result of the BHP acquisition.
Gearing, the ratio between debt and BP’s market value, rose to 31 per cent compared with 27.5 per cent.
Shell reports results on Thursday, while Exxon Mobil and Chevron are scheduled for Friday. — Reuters
