BP launches cost-cutting scheme despite beating profit expectations

BP surprised investors on Tuesday by reporting stronger-than-expected profits in the second quarter, following a period of price volatility.

Adjusted profits came to $2.4 billion (€2.1bn) for the three months through June, beating analyst forecasts of $1.8bn (€1.6bn). BP also announced a $750 million (€650mn) share buyback.

Despite the better-than-expected results, the firm added that it would be launching a cost-cutting scheme when its new chair joins in September.

This comes just a few months after BP said it would save $4bn to $5bn (€3.5bn to €4.3bn) by the end of 2027, relative to 2023 costs. On Tuesday, the firm said that it had so far delivered around $1.7bn (€1.5bn) of structural cost reductions and sold $3bn (€2.6bn) of assets.

“Underlying earnings in our customers business are up around 50% compared to a year ago and trading has delivered well quarter-on-quarter during challenging conditions,” said BP CEO Murray Auchincloss in an earnings statement on Tuesday.

“This has been another strong quarter for BP operationally and strategically,” he continued.

New chairman Albert Manifold will replace former chair Helge Lund this year as the company cuts back on green spending and renews its focus on oil and gas. Lund was a pivotal figure in BP’s sustainability transition, a push that has been scaled back due to pressure from investors such as Elliott Management.

The firm said in February that it would increase oil and gas spending by about 20% to $10bn (€8.7bn) a year, while cutting renewable investment by around 70%.

BP shares rose just over 2% on Tuesday in London, as of around 11.00 CEST.

“Having already teased these quarterly results last month, the reaction to BP beating expectations is understandably fairly muted,” said AJ Bell investment director Russ Mould.

“However, as the company looks to bat off pressure from activist shareholder Elliott and convince the wider market on its recent shift in strategy, updates like today’s are helpful for management credibility.”

BP’s commitment to fossil fuels was strengthened when the company also announced on Monday that it had made its largest oil and gas discovery in 25 years in a field off the coast of Brazil.

The company said it had found a roughly 500-metre area of oil and gas at the Bumerangue field in the Santos basin, about 400km from Rio de Janeiro.

“BP delivered its first positive quarter in a very long time,” Maurizio Carulli, global energy analyst at Quilter Cheviot, commented on the earnings. “What is perhaps most encouraging is that this is despite the average Brent oil price in the quarter being at $68 per barrel, well below the average of $76 per barrel seen in the first quarter of the year.”

“The management team has clearly started delivering on the strategy reset announced a few months ago,” Carulli added.