BP predicts oil prices to remain 'elevated' as profits soar to highest for 14 years

BP shares rose 4%, hitting their highest levels since June and strongly outperforming the European energy index.

BP's second-quarter profit soared to $8.45bn (€8.27bn), its highest in 14 years, as strong refining margins and trading prompted it to boost its dividend and spending on new oil and gas production.

The strong performance caps a blowout quarter for the top Western oil and gas companies on the back of soaring energy prices that have increased pressure on governments to impose new taxes on the sector to help consumers.

"The company is running well and it continues to strengthen. We have real strategic momentum," chief executive Bernard Looney said. 

BP brings the second-quarter profit tally for the top Western oil and gas companies to $59bn after rivals, including Exxon Mobil and Shell, reported record earnings last week. BP shares rose 4%, hitting their highest levels since June and strongly outperforming the European energy index.

Mr Looney, who took office in 2020 with a vow to rapidly shift BP away from fossil fuels to renewables, said that the company will increase its spending on new oil and gas by $500m in response to the global supply crunch. 

"We will direct more investment towards hydrocarbons to help with energy security in the near term," Mr Looney said. "We'll probably direct about a half a billion dollars for hydrocarbons," he said. BP plans to maintain its overall capital expenditure this year in a range of $14bn to $15bn. 

BP increased its dividend by 10%, more than its previous guidance of a 4% annual increase. It halved its dividend in July 2020 for the first time in a decade in the wake of the pandemic. The company also increased its share repurchases plan for the current quarter to $3.5bn after it bought $4.1bn in the first half of the year.

"The fact it produced its highest quarterly profit in 14 years, even though oil prices were higher during that period than they are now, suggests BP is a more efficient machine than it was previously," AJ Bell investment director Russ Mould said.

The company said it expected crude oil and gas prices as well as refining margins to remain "elevated" in the third quarter and said it would stick to its target of using 60% of its surplus cash on share buybacks. The surge in revenue also allowed BP to sharply reduce its debt to $22.8bn from $27.5bn at the end of March. 

Reuters