BP beats profit expectations after warning of weaker oil refining

British oil giant BP on Tuesday reported stronger-than-expected net profit for the second quarter and raised its dividend despite previously warning of significantly lower refining margins.

The oil and gas major posted underlying replacement cost profit, used as a proxy for net profit, of $2.8 billion for the second quarter. That beat analyst expectations of $2.6 billion, according to an LSEG-compiled consensus.

BP reported net profit of $2.7 billion for the first three months of the year and $2.6 billion for the second quarter of 2023.

The energy firm announced it had increased its dividend by 10% to 8 cents per share, up from 7.27 cents. It also maintained the rate of its share buyback program at $1.75 billion over the next three months.

Kate Thomson, chief financial officer at BP, said Tuesday that the firm’s decision to boost shareholder returns “reflects the confidence we have in our performance and outlook for cash generation.”

BP said earlier in the month that weak refining margins and lower oil trading results would likely dent the firm’s second-quarter results by as much as $700 million. The firm on Tuesday confirmed a writedown of $1.5 billion, partly due to a plan to scale back refinery operations at its Gelsenkirchen plant in Germany.

“We are driving focus across the business and reducing costs, all while building momentum in our drive to 2025,” BP CEO Murray Auchincloss said in a statement.

“Our recent go-ahead of the Kaskida development in the Gulf of Mexico business, and decision to take full ownership of bp Bunge Bioenergia while scaling back plans for new biofuels projects, demonstrate our commitment to delivering as a simpler, more focused and higher value company,” he added.

BP’s net debt stood at $22.6 billion at the end of the second quarter, down from $23.7 billion compared to the same period last year.

Shares of the London-listed company are down roughly 2.8% year-to-date.

By comparison, shares of British rival Shell have climbed nearly 8% so far this year, while shares of U.S. oil giant Exxon Mobil have jumped more than 16%.

Reuters reported in late June that BP CEO Murray Auchincloss had imposed a hiring freeze and paused renewables projects as part of a cost-cutting plan to boost returns. BP said at the time that Auchincloss had introduced six priorities “to deliver as a simpler, more focused and higher value company.”