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BP share price: 4 things we learnt from its Q2 results

Higher oil production helped the oil and gas major beat earnings expectations for the tenth consecutive quarter.

BP PLC recorded a strong performance in its Q2 results on Tuesday, supported by strong oil output that saw the oil and gas company exceed analysts’ expectations once again.

IG looks at the key takeaways from its latest trading update.

Strong oil output underpins BP’s performance

BP recorded oil and gas production for the quarter averaged 3.8 million barrels a day of oil equivalent, representing a 4% increase over the same period a year prior.

The increase in output was driven by the start-up of its Culzean site in the North Sea, as well as a four further major upstream projects that commenced production in the first half of the year.

The company has a strong pipeline of new projects too, with final investment decisions being made for new upstream projects based in India and the Gulf of Mexico, as well as additional investment in Angola, the company said.

BP sees success midway through its five-year plan

The oil and gas major is now midway through its five-year plan, with the business on course to hit its targets, with it focused on delivering value for shareholders through a disciplined growth strategy.

Part of the five-year plan sees BP focusing on investing in greener energy and renewables, helping to contribute to the wider energy transition towards lower carbon output.

‘We have announced another resilient set of quarterly results, in particular delivering strong underlying cash* of over $8 billion,’ BP CFO Brian Gilvary said.

‘Following the final acquisition payments to BHP and the scheduled annual payments relating to the Gulf of Mexico oil spill being made in the quarter, we continue to expect gearing to trend down through 2020 in line with disposal proceeds from our $10 billion programme and ongoing operating cash flow delivery,’ he added.

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Growing low carbon businesses

In its Q2 earnings, BP announced that it had agreed to combine its Brazilian biofuels and biopower business with that of Bunge in a new equally-owned joint venture. Once completed, BP’s interest in the venture will be more than 50% larger than its existing biofuels business.

Lightsource BP, its solar energy business, which it holds a 43% stake in, has continued to make strong progress, including agreeing a significant expansion in Brazil.

The oil and gas major also agreed a $30 million venturing investment in Calysta, which will use BP's natural gas to produce protein feed for aquaculture and agriculture.

BP beats expectations once again

BP’s latest set of results saw the company beat analysts’ expectations for the tenth consecutive quarter.

‘Strong volume growth from accretive barrels and seamless execution remains underappreciated,’ analysts at Bernstein said in a note to investors.

The oil and gas company recorded underlying profit of $2.8 billion, in-line with last year, though managing to exceed its own forecast of $2.46 billion.

Operating cash flow, excluding Gulf of Mexico oil spill payments, was $8.2 billion in Q2.

BP’s performance was hindered by Gulf of Mexico oil spill payments worth $1.4 billion on a post-tax basis in the second quarter.

The oil and gas company also announce a dividend of 10.25 cents a share for the quarter.

This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.

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