BP powers ahead of analysts as oil major boosts profit by increasing output
BP shares rose this morning as the oil giant’s second quarter profit beat expectations by increasing production volumes.
The energy major reported that a seven per cent increase in oil and gas production counteracted this year’s fall in oil prices.
Shares were up 3.3 per cent in early morning trading.
The figures
BP’s second quarter profit was $2.8bn, roughly stable year-on-year. Analysts had expected the figure to be around $2.5bn.
Oil and gas production rose seven per cent to 2.6m barrels of oil equivalent per day.
Cash flow from operations grew to $6.8bn, up on $6.3bn this time last year. This figure did not include payments relating to the firm’s major oil spill in the Gulf of Mexico in 2010.
Net debt rose to $46.5bn, up on $38.7bn last year.
Why it’s interesting
The positive figures come just a week after French competitor Total said its second quarter profits dropped.
But other industry rivals Royal Dutch Shell, Exxonmobil and Chevron are yet to publish their earnings for the period. They are all pencilled in for later this week.
BP warned third quarter production would most likely be hit by maintenance work in the North Sea, Angola and the Gulf of Mexico. It added that it had suffered as a result of the recent Hurricane Barry in the US.
Steve Clayton, manager of the HL Select UK Income Shares fund which holds a position in BP, said the firm’s production-boosting plan had “paid off”.
“The group’s cash flows are robust and the outlook for dividends is a lot brighter today than it has been for some time. BP’s commitment to investors has been impressive in recent years.
“The group has shown real discipline in driving cash flows ahead, despite the weaker oil prices of recent years and the still ongoing costs of the 2010 oil spill in the Gulf of Mexico.
“With sterling currently weak due to fears over the economic impact of Brexit, BP’s dollar earnings look ever more valuable to UK investors.”
What BP said
Chief executive Bob Dudley said the firm was “right on track”.
“Reliable performance and disciplined growth across our businesses are delivering strong earnings, cash flow and returns to shareholders.
“And this is also allowing us to grow businesses that can make a significant contribution in the energy transition, helping deliver the energy the world needs with lower carbon.”
Main image: Getty