The BP share price, much like its peer Shell, has probably seen the highs of the year, given how far energy prices have fallen over the past 12 months. It was no surprise last week to see Shell miss forecasts on its Q2 numbers so expectations that BP would follow suit with a similar set of numbers were quite high.
Given those expectations, the bar was low for BP’s numbers today, and yet this morning’s numbers still failed to clear it and by quite some distance, as profits fell more than expected, down almost 70% to $2.59bn. Despite this the shares have edged higher on the back of the announcement of a new $1.5bn share buyback, and a 10% increase in the dividend.
Q2 revenue came in at $48.54bn, while underlying replacement cost profit slid to $2.59bn, missing estimates by almost $1bn, helping to lift profits for H1 up to $7.6bn. In an attempt to offset this disappointment BP have taken the decision to announce a bigger than expected buyback of $1.5bn, while raising the dividend by 10% to 7.27c a share.
This appears to have come about as a result of increasing the company’s net debt by $2bn to $23.7bn, pushing its net gearing up to 21.7%.
When it comes to the underlying business, its gas and low carbon energy business outperformed with only a modest fall in profits to $2.23bn, while oil production and operations saw profits decline to $2.78bn. The decline in profits in the oil business was much more marked, with profits sliding by more than half, from the same quarter a year ago when they came in at $5.9bn.
Customers and profits also saw a big fall in profits of 80% to $796m. total tax paid during the quarter came in at $2.1bn.
On guidance for Q3 BP said it expects upstream production to be broadly flat compared to Q2, with oil production output expected to be lower, and gas and lower carbon energy to be higher.
Gulf of Mexico oil spill payments are expected to be $1.3bn for the year.
Guidance for capex was kept unchanged at between $16bn and $18bn, with saying that it remained committed to using 60% of surplus cash flow in helping to deliver up to $4bn of share buybacks per annum.
Disclaimer: CMC Markets is an execution-only service provider. The material (whether or not it states any opinions) is for general information purposes only, and does not take into account your personal circumstances or objectives. Nothing in this material is (or should be considered to be) financial, investment or other advice on which reliance should be placed. No opinion given in the material constitutes a recommendation by CMC Markets or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although we are not specifically prevented from dealing before providing this material, we do not seek to take advantage of the material prior to its dissemination.