Steep drop in profit on lower oil and gas prices

LONDON — Oil major BP on Tuesday reported a nearly 70% year-on-year drop in second-quarter profits on the back of weaker fossil fuel prices, echoing a trend observed across the energy industry.

The British energy major posted second-quarter underlying replacement cost profit, used as a proxy for net profit, of $2.6 billion. Analysts had expected BP to report second-quarter profit of $3.5 billion, according to estimates collated by Refinitiv.

The second-quarter result compared with a profit of $4.96 billion recorded in the first three months of the year and with the $8.5 billion logged in the second quarter of 2022.

BP said the earnings reflected significantly lower realized refining margins, a higher level of turnaround and maintenance activity and a weak oil trading result.

Nonetheless, the energy giant boosted its dividend by 10% to 7.27 cents per ordinary share for the second quarter. BP also said it would repurchase $1.5 billion of its shares over the next three months.

“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%,” BP CEO Bernard Looney told CNBC’s “Squawk Box Europe” on Tuesday.

“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,” he added.

Oil majors have failed to match the bumper profits posted during the same period of last year amid weaker commodity prices.

British rival Shell and French oil major TotalEnergies on Thursday reported a steep drop in second-quarter profit, while U.S.-based Exxon Mobil’s second-quarter profit slumped 56% year-on-year.

The West’s five largest oil companies raked in combined profits of nearly $200 billion in 2022, as oil and gas prices soared following Russia’s full-scale invasion of Ukraine. For its part, BP reported annual record profit of $27.7 billion for the full year of 2022.

Oil and gas prices came under pressure in the first half of this year, however, as global economic jitters outweighed supply-demand fundamentals.

Shares of BP are roughly 1.7% higher year-to-date.