BP reported on Tuesday a sharp slide in profits in the second quarter, with earnings falling about 70 percent compared with the record-breaking totals of a year earlier. Adjusted profits were $2.6 billion, compared with $8.5 billion in the same period a year earlier, BP said.
Behind the Numbers
The sharp drop was largely because of lower prices for the oil and natural gas that the company produces and sells. Energy prices soared last spring after Russia’s invasion of Ukraine, generating huge profits for oil companies. Since then, all major energy companies have been hit by lower prices, but BP’s earnings fell more proportionally than those of other large oil companies like Chevron and Shell.
In an interview, BP’s chief executive, Bernard Looney, attributed the results to weak profits from products like diesel fuel as well planned maintenance outages at its refineries. “There’s really no more to the story than that,” Mr. Looney said.
In a reminder of how important dividend payments from large energy companies are to investors, BP said it would increase its distribution by 10 percent, to about 7.3 cents a share, despite the earnings drop. The company’s stock price rose more than 1 percent in Tuesday trading.
German Wind Farms in the Future
After launching a whirlwind of changes in both personnel and business strategy when he became chief executive three years ago, Mr. Looney seems to have settled into a company that’s still heavily dependent on oil and gas but making big bets on clean energy.
BP, based in London, recently said it would maintain petroleum production levels, but it also recently agreed to pay about $7 billion for the rights to build two large wind farms off Germany.
Mr. Looney suggested the price was lower than it might seem because it will be gradually paid over nearly 20 years. He also said he was confident that the projects would meet BP’s profit targets. The power will be used to provide green energy to BP’s two refineries in the country and it’s extensive vehicle charging system there. “We are delighted with that win in Germany,” he said.
‘Incredibly Strong’ Demand for Oil
Oil prices have risen around 20 percent since mid-June, to about $85 a barrel for Brent crude, the international benchmark. Mr. Looney, who has a front-row seat to the oil markets, made the case that the market may remain robust in the near term.
Despite worries about the global economy and a faltering recovery in China, “demand for oil has been incredibly strong,” he said.
At the same time, he noted that the group of oil producers known as OPEC Plus was being increasingly disciplined about restraining supply while shale oil drillers in the United States were also reining in activity. “Despite a lot of uncertainties in the world, you’d have to believe, from that evidence at least, that prices are going to be strong over the coming months,” he said.
Stanley Reed has been writing from London for The Times since 2012 on energy, the environment and the Middle East. Before that he was London bureau chief for BusinessWeek magazine. More about Stanley Reed
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