(Bloomberg) -- BP (LON:BP) Plc churned out more profit in the second quarter, offering reassurance to investors about its financial strength after announcing its biggest deal in almost two decades.
The London-based company is pursuing growth again after spending much of the past eight years shaking off the impact of the fatal Gulf of Mexico oil spill and a deep industry downturn. Chief Executive Officer Bob Dudley is seeking to prove all that hard work won’t be undone and his $10.5 billion acquisition of U.S. shale assets is good value.
To woo shareholders, BP raised its dividend payout last week for the first time since 2014, while also pledging to hold annual spending steady, continue stock repurchases and keep debt at manageable levels. That effort was reinforced on Tuesday by the company’s fourfold increase in second-quarter profit, which beat analysts’ estimates. Rivals including Royal Dutch Shell (LON:RDSa) Plc and Exxon Mobil Corp (NYSE:XOM). fell shy of expectations.
“We continue to make steady progress against our strategy and plans, delivering another quarter of strong operational and financial performance,” Dudley said in a statement. “Given this momentum and the strength of our financial frame, we are increasing our dividend for the first time in almost four years.”
BP’s profit adjusted for one-time items and inventories was $2.82 billion in the second quarter, higher than analysts’ estimate of $2.66 billion. Cash flow from operations, excluding payments related to the Gulf of Mexico spill and including a working capital release, was $7 billion compared with $6.9 billion a year earlier. Gearing, the ratio of net debt to capital, dropped to 27.8 percent from 28.8 percent a year ago.
Annual capital expenditure will be about $15 billion this year, despite the deal to buy the shale assets from BHP Billiton (LON:BLT) Ltd., BP said. Gearing will not rise above 30 percent and it will buy back shares issued to fund the shale deal “over time” by selling as much as $6 billion of assets.
To read about BP’s biggest acquisition since the 1990s, click here
Brent crude averaged more than $70 a barrel in the second quarter for the first time in more than three years. Though prices are still some way off the heady days of $100, investors expect the oil companies to generate large profits while maintaining their discipline on costs and spending.
The industry failed to entirely meet those expectations last week. Shell’s profit rose and it started a much-awaited share buyback, but earnings missed estimates. Exxon Mobil and Chevron Corp. (NYSE:CVX) trod similar paths. Only Total SA (PA:TOTF) seemed to give everyone what they wanted.