(Bloomberg) — BP Plc maintained the pace of share buybacks and increased its dividend as strong second-quarter earnings from pumping crude offset weakness in other parts of the business.
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In an effort to secure the future of its profitable upstream division, BP also gave the go-ahead to the Kaskida oil project in the US Gulf of Mexico, potentially the first in a series of new developments in the region. The company, which has embraced the transition to clean energy more vigorously than most of its peers, expects fossil-fuel production to grow this year.
The British oil major reiterated that it will purchase $3.5 billion of stock through to the end of this year, while boosting its dividend by 10% to 8 cents a share, as expected. Investor returns were underpinned by falling net debt and healthy operating cash flow, which was almost 30% higher than a year earlier.
The shares rose 1.9% to 461.45 pence as of 9:48 a.m. in London on Tuesday.
BP and its European peers are making more money from oil production as OPEC+ output cuts support prices, but they’re earning less from refining amid greater competition from imports. Last week, France’s TotalEnergies SE reported a drop in profit on the back of weaker fuel-processing margins. The trend looks like it may continue in the third quarter, with margins remaining “sensitive” to shifts in the cost of supply, according to BP.
Confirmation of the dividend and buybacks should be “taken positively,” while the reduction in net debt also boosts the investment case, RBC analyst Biraj Borkhataria said in a note.
BP’s adjusted net income for the second quarter was $2.76 billion, beating the average analyst estimate of $2.69 billion.
“We are driving focus across the business and reducing costs,” Chief Executive Officer Murray Auchincloss said in a statement. “This all supports growing returns for shareholders.”
Kaskida, which should start in 2029, will produce as much as 80,000 barrels a day from high-pressure fields deep below the seabed in the Paleogene geological zone, one of several potential developments in the region.
The decision to proceed with the project underlines BP’s shift back toward oil and gas, with less emphasis on the rapid decarbonization of the business.
Under Auchincloss, who was formally appointed to the position at the start of the year, BP has said its net zero destination remains unchanged but the pathway will be different from that of his predecessor, Bernard Looney.
A refocus on oil and gas would mirror the course taken by Wael Sawan, the CEO at closest rival Shell Plc. BP said it will provide an update on its medium-term strategy in February.
–With assistance from Will Kennedy.
(Updates with analyst comment in sixth paragraph.)
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