BP Shares Rise After Dividend Increase, Q2 Profit Beat

London-listed shares in BP PLC (LON:BP) jumped by more than 3% on Tuesday after the British energy giant reported a surge in second-quarter earnings to a 14-year high and increased its dividend.

Underlying replacement cost profit, the company’s definition of net income, attributable to shareholders rose to $8.45 billion, up from nearly $6.2 billion during the prior three-month period and well above analyst estimates of $6.8 billion. BP credited the uptick to solid refining margins and strong oil trading performance, along with a recent spike in oil prices.

The result offset disappointing gas trading and a rise in costs related to the recent shutdown of the Freeport liquefied natural gas export plant in Texas.

“BP continues to build a track record of delivery against its disciplined financial frame, which remains unchanged,” said chief financial officer Murray Auchincloss in a statement.

BP raised its dividend by 10% to 6.006, up from its previous promise to deliver an annual dividend increase of around 4%. The company also vowed to buyback $3.5 billion in shares during the second quarter after repurchasing about $4.1 billion in the first six months of the year.

“For 2022 and subject to maintaining a strong investment grade credit rating, BP remains committed to using 60% of surplus cash flow for share buybacks and intends to allocate the remaining 40% to further strengthen the balance sheet,” BP said.

BP slashed its dividend in half in July 2020 as it dealt with the fallout from the onset of the pandemic, but has since pledged to raise it by 4% annually.

Undergirding this announcement was BP’s outlook for energy prices, which have been boosted recently by a post-pandemic rebound in demand and disruptions to the global supply partly stemming from Russia’s invasion of Ukraine.

The group said it now expects oil prices to “remain elevated” in the third quarter as these factors lead to reduced levels of spare capacity and lower inventories. Gas price volatility is also estimated to rise as Europe struggles to make up for disruptions in key Russian pipeline flows.

BP added that refining margins, or the difference between the price of crude and refined products, will also get a lift from ongoing supply delays.