BP vows to do better for investors as profit tops forecast

By Shadia Nasralla

LONDON (Reuters) -BP will launch a review of how best to develop and monetise its oil and gas production assets and consider more cost cuts to boost shareholder returns, the oil major said on Tuesday, as it beat second-quarter profit expectations.

BP, under pressure from investors after years of underperforming rivals and also the target of activist investor Elliott, reaffirmed plans to divest $20 billion in assets by 2027 and reduce debt and costs.

"We will conduct a thorough review of our portfolio of businesses to ensure we are maximizing shareholder value moving forward – allocating capital effectively. We are also initiating a further cost review," CEO Murray Auchincloss said.

"BP can and will do better for its investors."

The company raised its quarterly dividend by 4% to 8.32 cents and will repurchase $750 million in shares before third-quarter results, keeping its buyback pace steady.

The portfolio review will guide how and in what sequence BP will allocate its $13–$15 billion annual investment budget, given new projects in Azerbaijan, Iraq, Libya, and Abu Dhabi and exploration successes in Namibia and Brazil, Auchincloss told Reuters.

BP, which also has a plan to boost its U.S. production both onshore and offshore, on Monday called its Brazil Bumerangue block discovery its largest in 25 years.

Auchincloss said BP may seek partners for some upstream assets. "It's a nice problem to have," he said.

BP has already achieved $1.7 billion of its $4–$5 billion cost-cutting target for 2023–2027. Finance Chief Kate Thomson said benchmarking data coming in over the summer could prompt further reductions.

The review comes after Auchincloss talked to incoming Chair Albert Manifold, who replaces Helge Lund next month. Lund had come under pressure for supporting BP’s previous pivot to renewables, which has weighed on its share performance since 2020.

Rumours have abounded about BP becoming a takeover target, pushing rival Shell to deny media reports in June that it was in merger talks with BP.

BP reported second-quarter adjusted net income of $2.4 billion, down 14% year-on-year, but ahead of analysts' average forecast of $1.8 billion. Its shares were up 2.6% at 1032 GMT, outperforming the European energy index.

BP's quarterly performance was boosted by a 33% profit increase at its customers and products division, driven by strong oil trading, higher volumes, and a 20% rise in earnings at its Castrol unit.

That contrasted with a weaker quarter in oil trading at Shell.

Auchincloss said the process to sell Castrol, the biggest piece of its divestment programme, was going "fine".

BP's gas and low-carbon earnings also exceeded expectations.

BP has completed $3 billion in divestments towards its $3–$4 billion 2025 goal. Net debt fell by $1 billion to $26 billion, compared with a target range of $14–$18 billion by 2027.

Brent crude oil averaged $67 per barrel in April-June, down from $75 in the previous quarter and $85 a year earlier.

(Reporting by Shadia Nasralla. Editing by Mark Potter and Louise Heavens)