Discover BP PLC's USD 1.5 Billion Buyback Announcement and Increased Dividend Amidst Improved Profits
Buybacks
August 1, 2023
BP PLC, one of the world's leading oil majors, made a significant announcement on Tuesday, unveiling a USD 1.5 billion share buyback program alongside an increased dividend following an interim swing to profit. Despite facing challenges in the second quarter of 2023, the company remains optimistic about its future performance due to various factors, including seasonal demand and output restrictions by OPEC+ countries.
During the second quarter of 2023, BP reported an attributable profit of USD 1.79 billion. While this figure was considerably lower than the USD 9.26 billion recorded a year earlier, it marked a significant improvement from the first quarter of 2023, which saw profits amounting to USD 8.22 billion. Overall, the first half of 2023 saw a commendable rebound, with BP swinging to a profit of USD 10.01 billion from a loss of USD 11.13 billion in the previous year.
Despite the recovery in profits, the underlying replacement cost profit for the second quarter declined to USD 2.59 billion. This figure was down from USD 8.45 billion in the corresponding period last year and USD 4.96 billion in the first quarter of 2023. The decline in underlying replacement cost profit reflects the ongoing volatility in the oil market, which has been impacted by fluctuating oil prices.
The average realized price for oil in the first half of 2023 stood at USD 70.40 per barrel, a 23% decrease from the USD 92.00 recorded a year earlier. Moreover, this figure was 12% lower than BP's estimated average oil market price of USD 79.66 per barrel. Despite the challenges, BP declared a second-quarter dividend of 7.27 US cents, representing a 10% increase from the previous year. This brought the half-year dividend to 13.88 US cents, marking a substantial 21% rise from the previous year.
BP revealed its intention to launch a new share buyback program, with plans to complete it before reporting its third-quarter results. This upcoming buyback program will involve USD 1.5 billion worth of shares. The decision to repurchase shares reflects the company's confidence in its long-term growth prospects and commitment to returning value to its shareholders. Notably, this new program comes on the heels of the recently completed USD 1.75 billion share buyback.
Looking ahead, BP is optimistic about its prospects for 2023. The company anticipates higher reported and underlying upstream production compared to the previous year, aided by an allocation of USD 4.0 billion per year towards buybacks. Furthermore, BP expects support from seasonal demand and output restrictions imposed by OPEC+ countries during the third quarter. Additionally, the company predicts industry refining margins to remain above historical average levels, driven by strong seasonal demand in the US and low product inventories.
Despite facing challenges in the second quarter of 2023, BP PLC's announcement of a USD 1.5 billion share buyback program and increased dividend indicates the company's determination to navigate the market with resilience. With an optimistic outlook and strategic plans for the future, BP remains committed to delivering value to its shareholders while adapting to market fluctuations and industry dynamics.
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