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. Production Chief Gordon Birrell also listed Angola as an exploration area he was excited about.
BP, which also plans to boost its U.S. production both onshore and offshore, said on Monday it had made its largest global oil and gas discovery in 25 years in Brazil’s Santos basin.
Auchincloss said BP may seek to sell stakes in some upstream assets, adding the group had started talks about selling a stake in its Kaskida project in the Gulf of Mexico.
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 will join BP’s board next month to fully replace Helge Lund in October. Lund had come under pressure for supporting BP’s previous pivot to renewables, which has weighed on its share performance since 2020.
“It’s time to take stock as Albert joins as a new chair, and work together on this conundrum of lots of lots of great opportunities, but you can only choose so many,” Auchincloss told a conference call about the portfolio review.
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 1.6% at 1329 GMT, outperforming the European energy index.
BP’s quarterly performance was boosted by a 33% profit increase at its customers and products division which beat analyst expectations, helped by strong oil trading.
That contrasted with a weaker quarter in oil trading at Shell.
BP’s gas and low-carbon earnings also exceeded expectations.
BP has completed $3 billion in divestments towards its $3–$4 billion 2025 goal. Auchincloss said the process to sell Castrol, the biggest piece of its divestment programme, was going “fine”.
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, additional reporting by Stephanie Kelly. Editing by Mark Potter, Louise Heavens and Susan Fenton)
