BP ups dividend and announces $1.4bn buyback as profits recover

·Senior City Correspondent, Yahoo Finance UK
·3 min read
A BP petrol and diesel filling station in north London. Photo: Glyn Kirk/AFP via Getty Images
A BP petrol and diesel filling station in north London. Photo: Glyn Kirk/AFP via Getty Images

BP (BP.L) announced a bumper payout for investors on Tuesday, as the oil giant's business rebounded strongly from the worst impact of the COVID-19 pandemic.

BP hiked its half-year dividend by 4%, taking it to 5.46 cents per share, and announced a $1.4bn share buyback. 

The capital return came as BP returned to profit in the first half of the year. BP made a profit of $7.8bn in the first six months of 2021, compared with a loss of $21.2bn (£15.2bn) in the first half of 2020.

Watch: BP profits bounce back but investors may remain sceptical about its transformation

"Based on the underlying performance of our business, an improving outlook for the environment and confidence in our balance sheet, we are increasing our resilient dividend by 4% per ordinary share and in addition, we are commencing a buyback of $1.4 billion from first half surplus cash flow," chief executive Bernard Looney said in a statement.

"On average at around $60 per barrel, we expect to be able to deliver buybacks of around $1.0 billion per quarter and to have capacity for an annual increase in the dividend per ordinary share of around 4%, through 2025. 

"This shows we continue to perform while transforming bp - generating value for our shareholders today while we transition the company for the future."

Shares in the oil major rallied 2.2% in London.

BP shares popped on news of the shareholder payout. Photo: Yahoo Finance UK
BP shares popped on news of the shareholder payout. Photo: Yahoo Finance UK

BP's share price hit a 25-year low in late 2020, as COVID-19 caused oil prices and demand to plunge. The price of oil has rebounded strongly since the start of 2021 as economies have begun to reopen. Brent (BZ=F) now sits near a 3-year high at $76 per barrel.

"There is little doubt that the rise in the oil price has helped BP this quarter, along with the rest of its peers," said Michael Hewson, chief market analyst at CMC Markets. 

"However, if the company wants to meet CEO Bernard Looney’s plans for a 40% reduction in oil and gas production by 2030, then it will need to invest a lot more in renewables to be able to do that, and while shareholders will no doubt be pleased at today’s extra windfall, you have to question whether this is the best long-term use of the company’s surplus cash flow."

Looney took charge of BP in February 2020 and announced plans to make the fossil fuel business carbon neutral by 2050. He announced ambitious plans to push into renewable energies late last year.

Looney said on Tuesday: "We are a year into executing bp's strategy to become an integrated energy company and are making good progress - delivering another quarter of strong performance while investing for the future in a disciplined way."

Watch: Top tips for helping the environment on a tight budget

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