BP PLC Form 6-K Summary: Second Quarter 2024
Business Context and Reporting Period
This Form 6-K reports the financial results for BP p.l.c. for the second quarter and first half of 2024, ended June 30, 2024. The filing serves as the company's half-yearly financial report. BP continues to focus on a disciplined financial frame, reducing costs, advancing growth projects, and increasing shareholder distributions while navigating volatile energy markets.
Key Financial Metrics
| Metric ($ million) | 2Q 2024 | 1H 2024 | 2Q 2023 | 1H 2023 |
|---|---|---|---|---|
| Profit (loss) attributable to BP shareholders | (129) | 2,134 | 1,792 | 10,010 |
| Underlying RC Profit | 2,756 | 5,479 | 2,589 | 7,552 |
| Operating Cash Flow | 8,100 | 13,109 | 6,293 | 13,915 |
| Capital Expenditure | (3,691) | (7,969) | (4,314) | (7,939) |
| Net Debt | 22,614 | 22,614 | 23,660 | 23,660 |
| Adjusted EBITDA | 9,639 | 19,945 | 9,770 | 22,836 |
| Dividend per Ordinary Share (cents) | 8.000 | 15.270 | 7.270 | 13.880 |
Note: Underlying RC Profit excludes inventory holding gains/losses and adjusting items. Net Debt is a non-IFRS measure.
Material Changes vs. Prior Period
- Reported Profit Decline: BP reported a loss of $0.1 billion for 2Q24 compared to a profit of $1.8 billion in 2Q23. This was primarily driven by a net adverse impact of adjusting items of $2.8 billion (post-tax), including $1.5 billion in asset impairments (notably the Gelsenkirchen refinery) and $0.9 billion in fair value accounting effects.
- Underlying Profit Growth: Despite the reported loss, Underlying RC Profit increased to $2.8 billion in 2Q24 from $2.6 billion in 2Q23, reflecting stronger fuels margins and lower taxation, partially offset by lower refining margins and an average gas trading result.
- Cash Flow Strength: Operating cash flow surged to $8.1 billion in 2Q24, up from $6.3 billion in 2Q23, driven by a working capital release of $0.5 billion.
- Debt Reduction: Net debt decreased to $22.6 billion from $23.7 billion in 2Q23, supported by strong cash generation.
- Segment Performance:
- Gas & Low Carbon Energy: Underlying profit before interest and tax was $1.4 billion, down from $2.2 billion in 2Q23 due to an average gas marketing result compared to an exceptional result last year.
- Oil Production & Operations: Underlying profit before interest and tax was $3.1 billion, flat year-over-year, driven by higher volumes and realizations offset by higher costs.
- Customers & Products: Underlying profit before interest and tax was $1.1 billion, up from $0.8 billion in 2Q23, aided by stronger fuels margins and convenience performance, though refining margins were significantly lower.
Guidance, Outlook, and Management Commentary
- Shareholder Returns: BP announced a 10% dividend increase to 8 cents per share. The company completed a $1.75 billion share buyback in 2Q24 and intends to execute another $1.75 billion buyback in 3Q24. BP remains committed to returning at least 80% of surplus cash flow to shareholders, with plans for at least $14 billion in buybacks through 2025.
- Capital Discipline: Capital expenditure is expected to remain around $16 billion for 2024 and 2025. BP is re-focusing its bioenergy business, taking full ownership of bp Bunge Bioenergia while scaling back plans for new biofuels projects.
- Strategic Progress: Key milestones include the Final Investment Decision (FID) on the Kaskida project in the Gulf of Mexico and the acquisition of a 30% interest in the Hess-operated Vancouver prospect.
- 3Q24 Outlook: BP expects reported upstream production to be lower than 2Q24. Refining margins are expected to remain sensitive to product cracks and crude differentials. Income taxes paid are expected to be approximately $1 billion higher than 2Q24 due to installment payment timing.
- Risks: Principal risks include fluctuating commodity prices, geopolitical instability, major project delivery challenges, and the transition to a lower carbon economy. The company notes no material changes to principal risks for the remainder of the year.
Investor Verification Checklist
- Adjusting Items Impact: Verify the composition of the $2.8 billion adverse adjusting items, specifically the $1.5 billion impairment charge related to the Gelsenkirchen refinery and the $0.9 billion fair value accounting effects on LNG contracts.
- Refining Margins: Monitor the trend in realized refining margins, which were significantly lower in 2Q24 due to weaker middle distillate margins and narrower North American heavy crude differentials.
- Share Buyback Execution: Confirm the execution of the committed $1.75 billion buyback for 3Q24 and the total $3.5 billion commitment for the second half of 2024.
- Upstream Production Volumes: Track the expected decline in 3Q24 upstream production compared to 2Q24, particularly in higher-margin regions.
- Divestment Proceeds: Monitor the realization of the expected $2-3 billion in divestment and other proceeds for 2024, weighted towards the second half.