Supermajor BP joined its energy peers in posting markedly lower profits, thereby offering another glimpse of lower returns in the oil and natural gas markets after the geopolitical shock of the war in Ukraine provided the sector with an unexpected windfall in 2022.
Publishing its latest financials, BP announced a Q2 2023 profit of $2.6 billion representing a slump of 70% on an annualized basis over the same quarter last year. The figure missed analysts’ expectations of $3.5 billion and is also below the $5 billion profit mark that BP achieved in Q1 2023.
The decline was largely due to a fall in refining margins and oil trading, according to the company. It also blamed lower profits on higher maintenance costs in Q2.
BP’s net cash-flow came in negative at $269 million over the quarter, implying it had to borrow to meet its spending. That’s a marked contrast from a surplus of $2.3 billion in Q1 2023. BP’s debt-to-capital ratio, or gearing, came in at 21.7% for the second quarter, compared to 19.6% in the first quarter, and 21.9% over the same quarter a year ago.
The company’s latest financials mirror a pattern of declining profits across the industry. In recent weeks, many of its European peers including Shell, TotalEnergies and OMV have all posted lower quarterly profits. As have the company’s U.S. rivals like ExxonMobil
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Profits down but dividend hiked
Nonetheless, a reversal in quarterly profits did not prevent BP from announcing its fourth dividend hike since halving it following the breakout of the coronavirus pandemic in 2020. The company’s latest quarterly dividend now stands at 7.27 cents per share; a hike of over 10%.
The supermajor also said it will repurchase $1.5 billion of its shares over the next three months, having recently slowed down the pace of its quarterly share buyback program to $1.75 billion (from $2.75 billion in the prior three months).
“Our underlying performance was resilient with good cash delivery – during a period of significant turnaround activity and weaker margins in our refining business,” Chief Executive Officer Bernard Looney said in a statement.
Akin to its British rival Shell, BP too is returning to ‘crude’ basics as the short-lived idea of higher returns from fewer barrels becomes a thing of the past. The company now has an aim of producing 2 million barrels of oil equivalent per day by 2030; a reduction of 25% from 2019 levels, and way down from previously outlined plans for a 40% reduction. Its highly likely many others in the industry will follow suit. That’s if they haven’t already.
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