With falling commodity prices, BP and other oil giants faced significant headwinds taking a major hit on its profits during Q2 2023.
On Tuesday, August 1, oil giant British Petroleum (LON: BP) reported a 70% drop in profits for Q2 2023 on the backdrop of weaker fossil fuel prices.
BP in Q2 2023
BP, the British energy company, reported a second-quarter underlying replacement cost profit of $2.6 billion. Analysts had anticipated a higher profit of $3.5 billion for the same period, based on estimates from Refinitiv.
In the second quarter, BP made a profit of $2.6 billion, which was lower than the $4.96 billion profit in the previous quarter and the $8.5 billion profit in the same quarter last year. The decrease in earnings was due to lower refining margins, increased maintenance activities, and a weak performance in oil trading.
However, the petroleum and energy giant boosted its dividend by 10% by 7.27 cents per share, during the second quarter. Furthermore, BP has announced a buyback of $1.5 billion worth of its shares over the next quarter. Speaking on the development, BP CEO Bernard Looney told CNBC’s “Squawk Box Europe”:
“A very good quarter and that has given the board … the confidence to announce a $1.5 billion buyback program for the quarter and additionally we’ve raised the dividend by 10%. So, all in all, we’re doing what we said we would do which is performing while transforming and we’re very pleased with the results.”
As of press time, the BP stock price is up by 2.01% and is currently trading at 492.70 GBX. Amid weaker commodity prices, oil majors have failed to post bumper profits as they did during Q2 2022.
In 2022, the five largest oil companies in the West made a total profit of almost $200 billion, benefiting from the surge in oil and gas prices after Russia’s invasion of Ukraine. BP, in particular, achieved a record profit of $27.7 billion for the entire year of 2022.
BP Dialing Back on Its Promise of Reducing Carbon Emissions
BP has faced criticism in recent times for weakening its promises on climate action. In 2020, the company had committed to becoming a net-zero company by 2050 or even earlier. However, earlier this year, it revised its plans and decided to reduce its carbon emissions by scaling back its oil and gas production.
Previously, BP had promised to lower emissions by 35% to 40% by the end of this decade. However, in early February, it changed its target to a 20% to 30% reduction instead. When asked why is BP shifting its goalposts, Looney said:
“We, actually, in February announced that we’re leaning into our strategy and announced that we were going to put $8 billion more into the energy transition this decade, spending between $55 [billion] and $65 billion. At the same time, we announced that we would increase our investment in oil and gas, and that’s because it’s crucial that we invest in the supply of today’s energy system to meet the demand.”
“If we don’t, there’s only one thing that is going to happen and that’s that prices are going to go up. We need a rapid transition and we need to make sure that the transition is orderly,” added he.