ii view: BP underlines focus on shareholder returns

Second-quarter results to 30 June

• Adjusted profit of $2.76 billion, up from $2.72 billion in Q1
• Net debt down 6% from Q1 to $22.6 billion
• Quarterly dividend up 10% from Q1 to 8 US cents per share
• Quarterly share buyback of $1.75 billion

Guidance:

• Continues to expect full-year upstream production to be slightly higher than 2023
• Targeting second-half share buybacks totalling $3.5 billion
• Continues to expect full-year 2024 divestment and other proceeds of $2-to-$3 billion

Chief executive Murray Auchincloss said: “Our businesses continue to operate safely and efficiently. We are driving focus across the business and reducing costs, all while building momentum in our drive to 2025. Our recent go-ahead of the Kaskida development in the Gulf of Mexico business, and decision to take full ownership of bp Bunge Bioenergia while scaling back plans for new biofuels projects, demonstrate our commitment to delivering as a simpler, more focused and higher value company. This all supports growing returns for shareholders, as we have announced today.”

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ii round-up:

Started in 1908, oil major BP (LSE:BP.) today operates across four arenas. 

Oil production and operations account for its core hydrocarbon operations. Gas and low-carbon energy combine its natural gas capabilities with low and zero-carbon production. 

Customer and products bring together its Castrol lubricants, aviation fuelling, and retail forecourt or ‎convenience sites, with other businesses including its engineering and safety assurance authorities. 

For a round-up of these latest results announced on 30 July, please click here.

ii view:

BP operates in more than 60 countries. Upstream production totals around 2.3 million barrels of oil per day, with its installed renewable capacity coming in at 2.7 Gigawatts. Group operations include more than 21,000 forecourt garages and more than 29,000 electric vehicle charging points. The gas and low-carbon division generated its biggest slug of profits during 2023 at almost half, followed by oil production and operations at close to two-fifths, and customer and products the balance of around a 10th. 

For investors, the tough economic outlook, including growth concerns for China, continue to mean uncertainty over future energy demand and usage. A dialling back of investments in climate-friendly arenas is unlikely to please all shareholders. Gulf of Mexico accident and spillage settlement payments continue, with a further $1.2 billion being paid in 2024, while a forecast one-year price earnings (PE) ratio above the three-year average may suggest the shares are not obviously cheap. 

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To the upside, and subject to energy prices, BP is targeting share buybacks of at least $14 billion over the next 2025 financial year. The group’s diversity of operations ranging from hydrocarbon production to wind-farm generation regularly sees challenges for one area countered by positives for another. A target to deliver at least $2 billion of cash cost savings by the end of 2026 continues to be pursued, while net debt of $22.6 billion contrasts with over $50 billion back in 2020. 

For now, with a strategy update expected alongside full-year results in February 2024, and the shares sat on an estimated future dividend yield of around 5.5%, fans of this oil major are likely to remain long-term loyal.    

Positives: 

• Pursuing at least $2 billion of cost savings 
• Focus on shareholder returns

Negatives:

• Climate-change concerns  
• Uncertain economic outlook

The average rating of stock market analysts:

Buy