BP delivers dividend hike after rebounding to profit

BP has unveiled a dividend hike and more share buybacks, with plans for further hefty investor payouts after rising oil prices saw it swing to a half-year profit.

The oil giant posted replacement cost profits of 5.7 billion US dollars (£4.1 billion) for six months to June 30 against eye-watering losses of 18.3 billion US dollars (£13.2 billion) a year ago, thanks to a sharp recovery in the cost of crude.

On an underlying basis, replacement cost profits stood at 5.4 billion US dollars (£3.9 billion), against losses of 5.9 billion US dollars (£4.2 billion) a year earlier, after a better-than-expected 2.8 billion US dollar (£2 billion) result for the three months to the end of June.

The group announced a 4% rise in the shareholder dividend to 5.46 cents a share for the second quarter and a 1.4 billion US dollar (£1 billion) share buyback before its third-quarter results, helping shares lift 6%.

It added that with oil prices now expected at 60 US dollars a barrel, it is set to deliver share buybacks of around 1 billion US dollars (£720 million) each quarter and hike its dividend by about 4% a year through to 2025.

The improved outlook for oil prices also saw the group boost its bottom line by reversing a previous impairment charge of 3 billion US dollars (£2.2 billion).

BP’s investor cheer comes a year after it slashed its dividend payout for the first time since the Deepwater Horizon disaster due to a massive collapse in the price of oil at the start of the pandemic.

The cost of crude dipped below zero dollars per barrel during the early parts of the Covid-19 crisis, but has since rebounded – with benchmark Brent crude now at more than 70 US dollars a barrel.

BP’s dividend increase also follows hot on the heels of rival Shell’s move to hike payouts for shareholders last week, with a near-40% rise for the second quarter.

Bernard Looney, chief executive of BP, said: “Based on the underlying performance of our business, an improving outlook for the environment and confidence in our balance sheet, we are increasing our resilient dividend by 4% per ordinary share and in addition, we are commencing a buyback of 1.4 billion US dollars from first half surplus cash flow.

“On average at around 60 US dollars per barrel, we expect to be able to deliver buybacks of around 1 billion US dollars per quarter and to have capacity for an annual increase in the dividend per ordinary share of around 4%, through 2025.

“This shows we continue to perform while transforming BP.”

BP said for the third quarter, it expects higher upstream production than in the previous three months, higher product demand across its customer business, and slightly improved refining margins.

It believes oil demand will recover throughout the remainder of 2021 “on the back of a bright macroeconomic outlook, increasing vaccination rollout and gradual lifting of Covid-19 restrictions around the world”, reaching pre-pandemic levels in the second half of 2022.

Prices will be pushed higher by supply constraints amid the recovery in demand, according to the group.

Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown, said: “BP isn’t quite throwing caution to the wind, but the company’s steady-as-she-goes approach has been infused with optimism as higher oil prices make immediate prospects look brighter.”