BP plc (LON:BP.), today announced second quarter and half year 2018 results.
Highlights
Strong earnings, strategic momentum, increased dividend
• Underlying replacement cost profit* for the second quarter of 2018 was $2.8 billion – four times that reported for the same period in 2017 – including significantly higher earnings from the Upstream and Rosneft.
• Operating cash flow excluding Gulf of Mexico oil spill payments* was $7.0 billion in the second quarter – which included a $1.3 billion working capital* release (after adjusting for inventory holding gains*) – and $12.4 billion in the first half, including a $0.4 billion working capital build.
• Dividend was increased 2.5% to 10.25 cents a share, the first rise since the third quarter of 2014.
• Upstream reported the strongest quarter since the third quarter of 2014 on both a replacement cost and underlying basis.
• Oil and gas production: reported production in the quarter was 3.6 million barrels of oil equivalent a day. Upstream production, excluding Rosneft, was 1.4% higher than a year earlier and up 9.6% when adjusted for portfolio changes and pricing effects, driven by rising output from new major projects* and strong plant reliability*.
• Major projects: with start-ups in Azerbaijan, Russia and Egypt, three of the six new projects expected to start in 2018 are now online.
• Strategic portfolio management: agreed to buy world-class US onshore oil and gas assets from BHP, a $10.5 billion acquisition that will transform BP’s US Lower 48 business. BP also agreed to increase its stake in the Clair oilfield in the UK while exiting the Greater Kuparuk Area in Alaska.
• Downstream reported strong first half refining performance, with record levels of crude processed at Whiting refinery in US; further expansion in fuels marketing, with more than 1,200 convenience partnership sites now across our retail network.
• Advancing the energy transition: acquisition of UK’s largest electric vehicle charging company Chargemaster and investment in innovative battery technology firm StoreDot move forward BP’s approach to advanced mobility.
• Gulf of Mexico oil spill payments in the quarter were $0.7 billion on a post-tax basis.
• Net debt* reduced in the quarter by $0.7 billion to $39.3 billion.
• BP’s share buyback programme continued with 29 million ordinary shares bought back in the first half at a cost of $200 million.
Bob Dudley – Group chief executive:
We continue to make steady progress against our strategy and plans, delivering another quarter of strong operational and financial performance. We brought two more major projects online, high-graded our portfolio through acquisitions such as BHP’s US onshore assets and invested in a low-carbon future with the creation of BP Chargemaster. Given this momentum and the strength of our financial frame, we are increasing our dividend for the first time in almost four years. This reflects not just our commitment to growing distributions to shareholders but our confidence in the future.
Results
For the half year, underlying replacement cost (RC) profit* was $5,408 million, compared with $2,194 million in 2017. Underlying RC profit is after adjusting RC profit* for a net charge for non-operating items* of $970 million and net adverse fair value accounting effects* of $260 million (both on a post-tax basis). RC profit was $4,178 million for the half year, compared with $1,965 million a year ago.
For the second quarter, underlying RC profit was $2,822 million, compared with $684 million in 2017. Underlying RC profit is after adjusting RC profit for a net charge for non-operating items of $723 million and net adverse fair value accounting effects of $310 million (both on a post-tax basis). RC profit was $1,789 million for the second quarter, compared with $553 million in 2017.
BP’s profit for the second quarter and half year was $2,799 million and $5,268 million respectively, compared with $144 million and $1,593 million for the same periods in 2017.
Non-operating items
Non-operating items amounted to a post-tax charge of $723 million for the quarter and $970 million for the half year. The charge for the quarter includes post-tax amounts relating to the Gulf of Mexico oil spill of $193 million for business economic loss claims and $126 million for other claims and litigation relating to the spill, as well as finance costs in respect of the unwinding of discounting effects relating to oil spill payables. See further information on page 29.
Effective tax rate
The effective tax rate (ETR) on RC profit or loss* for the second quarter and half year was 49% and 42% respectively, compared with 63% and 43% for the same periods in 2017. Adjusting for non-operating items and fair value accounting effects, the underlying ETR* for the second quarter and half year was 42% and 40% respectively, compared with 60% and 45% for the same periods in 2017. The lower underlying ETR for the second quarter and half year mainly reflected lower exploration write-offs partly offset by deferred tax charges due to foreign exchange impacts. ETR on RC profit or loss and underlying ETR are non-GAAP measures.
Dividend
On 26 July 2018 BP announced a quarterly dividend of 10.25 cents per ordinary share ($0.615 per ADS), which is expected to be paid on 21 September 2018. The corresponding amount in sterling will be announced on 11 September 2018. See page 26 for further information.
Share buybacks
BP repurchased 11 million ordinary shares at a cost of $80 million, including fees and stamp duty, during the second quarter of 2018. For the half year, BP repurchased 29 million ordinary shares at a cost of $200 million, including fees and stamp duty.
Operating cash flow*
Excluding post-tax amounts related to the Gulf of Mexico oil spill, operating cash flow* for the second quarter was $7.0 billion, including a $1.3 billion working capital* release (after adjusting for inventory holding gains*) and $12.4 billion in the half year, including a $0.4 billion working capital build (after adjusting for inventory holding gains), compared with $6.9 billion and $11.3 billion for the same periods in 2017. Including amounts relating to the Gulf of Mexico oil spill, operating cash flow for the second quarter and half year was $6.3 billion and $10.0 billion respectively (after a negative working capital impact of $0.6 billion for the quarter and $4.0 billion for the half year), compared with $4.9 billion and $7.0 billion for the same periods in 2017. See also Glossary for further information on working capital.
Capital expenditure*
Organic capital expenditure* for the second quarter and half year was $3.5 billion and $7.0 billion respectively, compared with $4.3 billion and $7.9 billion for the same periods in 2017.
Inorganic capital expenditure* for the second quarter and half year was $0.4 billion and $0.8 billion respectively, compared with $0.1 billion and $0.7 billion for the same periods in 2017.
Divestment and other proceeds
Divestment proceeds* were $0.2 billion for the second quarter and $0.3 billion for the half year, compared with $0.5 billion and $0.7 billion for the same periods in 2017.
Gearing*
Net debt* at 30 June 2018 was $39.3 billion, compared with $39.8 billion a year ago. Gearing at 30 June 2018 was 27.8%, compared with 28.8% a year ago.
We expect gearing to remain within the target band, of 20-30%, during the second half of 2018.
Net debt and gearing are non-GAAP measures. See page 26 for more information.
