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BP Plc followed its Big Oil competitors, by increasing dividends and share buybacks, as higher crude oil prices increased the company’s profit. All oil companies – with the notable exception of Exxon Mobil Corp.-are increasing returns as they are confident that the worst slump caused by the coronavirus pandemic is over. Their goal is to attract investors who are increasingly interested in a changing climate become suspicious of the future of fossil fuels.

BP increases its dividend to 5.46 cents per share

BP petrol station and logoBP will increase its dividend by 4% to 5.46 cents per share and in the third quarter Repurchase $ 1.4 billion worth of sharessaid Chief Executive Officer Bernard Looney.

What you see around the dividend is really history of trustLooney said Tuesday in a Bloomberg television interview. „Confidence in the underlying performance of the company, confidence in the balance sheet.“

The company’s shares rose 5.6% to 305.9 pence at 12:38 p.m. in London. At an average oil price of about $ 60 per barrel eexpects BP to increase its dividend by about 4% annually and to be able to buy back $ 1 billion worth of stock each quarter by 2025said Looney.

This would Increase total shareholder returns to about 10 %, at the top end of its comparison group, said Biraj Borkhataria, analyst at RBC Capital Markets, in a note. According to Bloomberg calculations would dividends still remain well below pre-pandemic levels of 10.5 cents per share.

Looney’s commitments go beyond the distribution policy outlined by BP earlier this year. The turnaround reflects the impact of higher energy prices, but also claims from shareholders who were not satisfied with the company’s plans at the beginning of 2021.

Twelve months after the definition of our strategy, the world is of course in a completely different placesaid Looney. „Global GDP is now back to pre-pandemic levels, vaccines are clearly working“and people travel more again.

Is BP overwhelmed by the energy transition?

BP and the energy transitionDespite the good news for income seekers, the company is now again overwhelmed due to a lower spending budget, higher payouts and planning for the energy transition, says Bloomberg Intelligence analyst Will Hares. „The problem is exacerbated by the long but steady returns from renewable energy projects“, where the benefits accrue over a much longer period of time compared to oil developments.

BP maintains its historically low $ 13 billion spending budget for this year, of which $ 2 billion will be allocated to its growing “low carbon business”. The company is increasing CO2 emissions from half a billion US dollars in 2019 to up to 4 billion US dollars in 2025.

The London-based company’s adjusted net income was $ 2.8 billion in the second quarter, according to the statement, compared to a loss of $ 6.68 billion in the previous year. That was above the average estimate of $ 2.13 billion among 19 Wallstreet analysts.

Higher shareholder returns show oil companies ‘ confidence, that higher oil and gas prices will continue. BP increased its price assumptions for Brent crude oil through 2030 to reflect expected supply shortfalls, reversing an earlier pre-tax net impairment of $ 3 billion.

The London-based major has expressed OPEC+ ‘ s desire to maintain “robust prices” and maintain a more “bullish” outlook for oil over the next five to ten years due to supply constraints in the face of less investment in the industry.

After BP will be in the first quarter Net debt target of $ 35 billion had been reached, BP’s net liabilities continued to decline to $ 32.71 billion in the reporting period thanks to the sale of assets. The company has set a goal of reaching $ 25 billion in divestments by 2025, to finance the expansion of its low-carbon business.

Last updated on August 3, 2021

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