BP PLC current report, Q2 FY2024

BP PLC Form 6-K Summary: Period Ended June 30, 2024

Business Context and Reporting Period

This Form 6-K reports the financial results for BP p.l.c. for the second quarter (Q2) and first half (H1) of 2024, ended June 30, 2024. The company operates across three primary segments: Gas & Low Carbon Energy, Oil Production & Operations, and Customers & Products. The reporting period highlights a disciplined financial framework focused on strong cash generation, growing distributions, and maintaining an investment-grade credit rating.

Key Financial Metrics

Metric ($ million) Q2 2024 Q2 2023 H1 2024 H1 2023
Sales and Operating Revenues 47,299 48,538 96,179 104,720
Profit (Loss) Attributable to BP Shareholders (129) 1,792 2,134 10,010
Underlying RC Profit (Non-IFRS) 2,756 2,589 5,479 7,552
Operating Cash Flow 8,100 6,293 13,109 13,915
Capital Expenditure (3,691) (4,314) (7,969) (7,939)
Adjusted EBITDA (Non-IFRS) 9,639 9,770 19,945 22,836
Net Debt 22,614 23,660 22,614 23,660
Finance Debt 54,986 49,738 54,986 49,738
Dividend per Ordinary Share (cents) 8.000 7.270 15.270 13.880

Material Changes vs. Prior Period

  • Reported Profit Decline: Q2 2024 reported a loss of $0.1 billion attributable to shareholders, compared to a profit of $1.8 billion in Q2 2023. This was driven by a net adverse impact of adjusting items of $2.8 billion (post-tax) and inventory holding losses.
  • Underlying Profit Growth: Underlying Replacement Cost (RC) profit for Q2 2024 was $2.8 billion, an increase from $2.6 billion in Q2 2023. This reflects average gas marketing results, lower refining margins, and lower taxation, offset by stronger fuels margins.
  • Segment Performance:
    • Gas & Low Carbon Energy: Reported an RC loss of $0.3 billion in Q2 2024 vs. a profit of $2.3 billion in Q2 2023, largely due to fair value accounting effects and lower gas marketing results. Underlying RC profit was $1.4 billion.
    • Oil Production & Operations: RC profit increased to $3.3 billion in Q2 2024 from $2.6 billion in Q2 2023, driven by higher volumes and liquid realizations.
    • Customers & Products: Reported an RC loss of $0.1 billion in Q2 2024 vs. a profit of $0.6 billion in Q2 2023. Underlying RC profit was $1.1 billion, supported by stronger fuels margins and Castrol performance, but weighed down by lower refining margins and a $1.3 billion impairment charge related to the Gelsenkirchen refinery.
  • Balance Sheet: Net debt decreased to $22.6 billion in Q2 2024 from $23.7 billion in Q2 2023, driven by strong operating cash flow. Finance debt increased to $55.0 billion.

Guidance, Outlook, and Risks

  • Shareholder Returns: BP announced a Q2 dividend of 8.0 cents per share. The company completed a $1.75 billion share buyback in July 2024 and intends to execute another $1.75 billion buyback prior to Q3 reporting. Total buybacks for H2 2024 are expected to be $3.5 billion, with a commitment to at least $14 billion through 2025.
  • Capital Expenditure: Expected to be around $16 billion for 2024, split evenly between halves. Divestment proceeds are expected to be $2-3 billion for the full year.
  • Production Outlook: Q3 2024 reported upstream production is expected to be lower than Q2 2024. Full-year 2024 production is expected to be slightly higher than 2023.
  • Refining Margins: Realized refining margins are expected to remain sensitive to product cracks and North American heavy crude differentials, with a lower level of industry margins relative to 2023.
  • Risks: Key risks include fluctuating commodity prices, geopolitical instability, major project delivery challenges, and the transition to a lower carbon economy. Specific legal proceedings include ongoing Gulf of Mexico oil spill settlement payments (expected $1.2 billion pre-tax for 2024).

Investor Verification Checklist

  • Adjusting Items Impact: Verify the composition of the $3.1 billion adverse pre-tax adjusting items in Q2 2024, specifically the $1.5 billion in asset impairments (including Gelsenkirchen) and $0.9 billion in fair value accounting effects.
  • Refining Margin Sensitivity: Monitor the impact of narrowing North American heavy crude differentials and weaker middle distillate margins on the Customers & Products segment.
  • Gas Marketing Volatility: Assess the sustainability of gas marketing and trading results, which shifted from exceptional in Q2 2023 to average in Q2 2024.
  • Divestment Progress: Track the realization of the $2-3 billion divestment target for 2024, including the sale of the Turkey ground fuels business and the Egypt JV formation.
  • Capital Allocation: Confirm the execution of the $14 billion share buyback commitment through 2025 against surplus cash flow generation.