BP's Higher Hydrocarbon Output Buoyed by Soft Refining Margins — Energy Comment

By Christian Moess Laursen

BP reported a rise in underlying replacement cost profit as a higher output of oil-and-gas production offset weaker refining margins. Here is what the British energy giant had to say on its divisions' operational performances in the second quarter.

On the gas and low-carbon energy segment:

"Reported production for the quarter was 899,000 barrels of oil-equivalent a day, 0.5% lower than the same period in 2023. Underlying production was 0.4% higher, mainly due to ramp-up of major projects, partially offset by base decline."

"Renewables pipeline at the end of the quarter was 59.0 gigawatt, including 21.1 GW net share of Lightsource BP's pipeline. The renewables pipeline increased by 0.7 GW net during the half year. In addition, there is over 10 GW of early stage opportunities in Lightsource BP's hopper."

"The replacement cost result before interest and tax for the second quarter and half year was a loss of $315 million and a profit of $721 million respectively, compared with a profit of $2.29 billion and $9.64 billion for the same periods in 2023."

"The underlying RC profit before interest and tax for the second quarter and half year was $1.40 billion and $3.06 billion respectively, compared with $2.23 billion and $5.69 billion for the same periods in 2023."

"The underlying RC profit for the second quarter compared with the same period in 2023, reflects an average gas marketing and trading result compared with an exceptional result in the second quarter 2023, partly offset by a lower depreciation, depletion and amortization charge."

The unit includes gas, biofuels, onshore and offshore wind, solar energy and hydrogen and carbon-capture unit storage.

On the oil production and operations division's performance:

"Reported production for the quarter was 1.48 BOE a day, 8.2% higher than the second quarter of 2023. Underlying production for the quarter was 8.3% higher compared with the second quarter of 2023, reflecting BPX Energy performance and major projects partly offset by base performance."

"Underlying production for the quarter was 7.9% higher compared with the half year of 2023 reflecting BPX Energy performance and major projects partly offset by base performance."

"The RC profit before interest and tax for the second quarter and half year was $3.27 billion and $6.33 billion respectively, compared with $2.57 billion and $5.885 million for the same periods in 2023."

"The underlying RC profit before interest and tax for the second quarter and half year was $3.09 billion and $6.22 billion respectively, compared with $2.78 billion and $6.10 billion for the same periods in 2023."

"The underlying RC profit for the second quarter and half year, compared with the same periods in 2023, primarily reflect increased volume, higher liquids realizations and lower exploration write-offs partly offset by increased depreciation charges and higher costs."

The unit includes the development of hydrocarbon resources, oil-and-gas operations and refineries, pipelines and terminals.

On the customers and products segment:

"BP-operated refining availability for the second quarter and half year was 96.4% and 93.4%, compared with 95.7% and 95.9% for the same periods in 2023, with the half year lower mainly due to the first quarter Whiting refinery power outage."

"The replacement cost result before interest and tax for the second quarter and half year was a loss of $133 million and a profit of $855 million respectively, compared with a profit of $555 million and $3,235 million for the same periods in 2023."

"The second quarter and half year are adjusted by an adverse impact of net adjusting items of $1.28 billion and $1.58 billion respectively, mainly related to an impairment of the Gelsenkirchen refinery and associated onerous contract provisions."

"The underlying RC profit before interest and tax for the second quarter and half year was $1.15 billion and $2.44 billion respectively, compared with $796 million and $3.555 billion for the same periods in 2023."

"The customers result for the second quarter and first half was stronger compared to the same periods in 2023. The result benefited from higher retail fuels margins, a stronger Castrol result driven by higher volumes and margins, continued growth in convenience, and favorable foreign exchange movements. This was partly offset by a weaker European midstream performance driven by biofuels margins. The contribution of TravelCenters of America continues to be impacted by the U.S. freight recession."

"The products result for the second quarter was higher compared with the same period last year. In refining, the result for the second quarter was impacted by lower industry refining margins and benefited from a significantly lower level of turnaround activity. The oil trading contribution for the second quarter was weak."

The unit includes its aviation fuel supply business, lubricant business, retails sites, fuel and charging stations, its electric-vehicle charging solutions, fuel supply and transporting of products.

On guidance:

"BP expects third quarter 2024 reported upstream production to be lower compared with second-quarter 2024, including in higher margin regions."

"In its customers business, BP expects fuels margins to remain sensitive to movements in cost of supply, and seasonally higher volumes compared to the second quarter."

"In products, BP expects realized refining margins to continue to be sensitive to relative movements in product cracks and North American heavy crude oil differentials. In addition, BP expects a similar level of turnaround activity to the second quarter."

"BP expects income taxes paid in the third quarter to be around $1 billion higher than the second quarter 2024 mainly due to the timing of installment payments, which are typically higher in the third quarter each year."

"BP continues to expect both reported and underlying upstream production to be slightly higher compared with 2023. Within this, BP continues to expect underlying production from oil production and operations to be higher and production from gas and low carbon energy to be lower."

"BP continues to expect capital expenditure for 2024 to be around $16 billion, and continues to expect the phasing to be split broadly evenly between the first half and the second half."

"BP continues to expect divestment and other proceeds of $2 billion-$3 billion in 2024, weighted toward the second half. Having realized $18.9 billion of divestment and other proceeds since the second quarter of 2020, BP continues to expect to reach $25 billion of divestment and other proceeds between the second half of 2020 and 2025."

Write to Christian Moess Laursen at christian.moess@wsj.com

(END) Dow Jones Newswires

July 30, 2024 03:55 ET (07:55 GMT)

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