| Performing while transforming |
| Financial summary | Second | First | Second | First | First | ||
| quarter | quarter | quarter | half | half | |||
| $ million | 2023 | 2023 | 2022 | 2023 | 2022 | ||
| Profit (loss) for the period attributable to bp shareholders | 1,792 | 8,218 | 9,257 | 10,010 | (11,127) | ||
| Inventory holding (gains) losses*, net of tax | 549 | 452 | (1,607) | 1,001 | (4,271) | ||
| Replacement cost (RC) profit (loss)* | 2,341 | 8,670 | 7,650 | 11,011 | (15,398) | ||
| Net (favourable) adverse impact of adjusting items*, net of tax | 248 | (3,707) | 801 | (3,459) | 30,094 | ||
| Underlying RC profit* | 2,589 | 4,963 | 8,451 | 7,552 | 14,696 | ||
| Operating cash flow* | 6,293 | 7,622 | 10,863 | 13,915 | 19,073 | ||
| Capital expenditure* | (4,314) | (3,625) | (2,838) | (7,939) | (5,767) | ||
| Divestment and other proceeds(b) | 88 | 800 | 722 | 888 | 1,903 | ||
| Surplus cash flow* | (269) | 2,283 | 6,546 | 2,014 | 10,584 | ||
| Net issue (repurchase) of shares | (2,073) | (2,448) | (2,288) | (4,521) | (3,880) | ||
| Net debt*(c) | 23,660 | 21,232 | 22,816 | 23,660 | 22,816 | ||
| Adjusted EBITDA* | 9,770 | 13,066 | 16,357 | 22,836 | 30,240 | ||
| Announced dividend per ordinary share (cents per share) | 7.270 | 6.610 | 6.006 | 13.880 | 11.466 | ||
| Underlying RC profit per ordinary share* (cents) | 14.77 | 27.74 | 43.58 | 42.65 | 75.55 | ||
| Underlying RC profit per ADS* (dollars) | 0.89 | 1.66 | 2.61 | 2.56 | 4.53 |
| • Underlying RC profit $2.6bn; Operating cash flow $6.3bn | • 10% increase in resilient dividend to 7.270 cents per ordinary share; further $1.5bn share buyback announced | • Delivering resilient hydrocarbons – 2Q23 start-up of two major projects*; successful commissioning of Cherry Point refinery improvement projects | • Continued progress in transformation to an IEC – acquisition of TravelCenters of America; 4GW entry to German offshore wind; strong progress across the five transition growth* engines |
| Another quarter of performing while transforming. Our underlying performance was resilient with good cash delivery – during a period of significant turnaround activity and weaker margins in our refining business. We’re delivering our strategy at pace – we’ve started up two major oil and gas projects to help keep energy flowing today and we’re accelerating our transformation through our five transition growth engines. And we’re delivering for shareholders growing our dividend and announcing a further share buyback. This reflects confidence in our performance and the outlook for cash flow, as well as continued progress reducing our share count. |
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| Bernard LooneyChief executive officer |
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(a) This results announcement also represents bp’s half-yearly financial report (see page 16).
(b) Divestment proceeds are disposal proceeds as per the condensed group cash flow statement. See page 3 for more information on divestment and other proceeds.
(c) See Note 10 for more information.
RC profit (loss), underlying RC profit (loss), surplus cash flow, net debt, adjusted EBITDA, underlying RC profit per ordinary share and underlying RC profit per ADS are non-IFRS measures. Inventory holding (gains) losses and adjusting items are non-IFRS adjustments.
* For items marked with an asterisk throughout this document, definitions are provided in the Glossary on page 35.
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| Highlights | ||
| Underlying replacement cost profit* $2.6 billion | ||
| • Underlying replacement cost profit for the quarter was $2.6 billion, compared with $5.0 billion for the previous quarter. Compared to the first quarter 2023, the result reflects: significantly lower realized refining margins, a significantly higher level of turnaround and maintenance activity and a weak oil trading result; lower oil and gas realizations; and an exceptional gas marketing and trading result, albeit lower than the first quarter.• Reported profit for the quarter was $1.8 billion, compared with $8.2 billion for the first quarter 2023. The reported result for the second quarter is adjusted for inventory holding losses* of $0.5 billion (net of tax) and a net adverse impact of adjusting items* of $0.2 billion (net of tax) to derive the underlying replacement cost profit. Adjusting items include impairments of $1.2 billion and favourable fair value accounting effects* of $1.1 billion. | ||
| Operating cash flow* $6.3 billion | ||
| • Operating cash flow in the quarter of $6.3 billion includes $1.2 billion of Gulf of Mexico oil spill payments within a working capital* release (after adjusting for inventory holding losses, fair value accounting effects and other adjusting items) of $0.1 billion (see page 30).• Capital expenditure* in the second quarter was $4.3 billion including $1.1 billion for the acquisition of TravelCenters of America, net of adjustments. bp continues to expect capital expenditure, including inorganic capital expenditure*, of $16-18 billion in 2023.• During the second quarter, bp completed $2.1 billion of share buybacks. This included $225 million as part of the $675 million programme announced on 7 February 2023 to offset the expected full-year dilution from the vesting of awards under employee share schemes in 2023.• The $1.75 billion share buyback programme announced with the first quarter results was completed on 28 July 2023. Over the last four quarters bp has completed over $10 billion of buybacks from surplus cash flow* and reduced its issued share capital by over 9%.• Net debt* was $23.7 billion at the end of the second quarter. | ||
| Growing distributions within an unchanged financial frame | ||
| • A resilient dividend is bp’s first priority within its disciplined financial frame, underpinned by a cash balance point* of around $40 per barrel Brent, $11 per barrel RMM and $3 per mmBtu Henry Hub (all 2021 real).• For the second quarter, bp has announced a dividend per ordinary share of 7.270 cents, an increase of 10%.• bp remains committed to using 60% of 2023 surplus cash flow for share buybacks, subject to maintaining a strong investment grade credit rating.• bp intends to execute a further $1.5 billion share buyback prior to reporting third quarter results.• In setting the dividend per ordinary share and buyback each quarter, the board will continue to take into account factors including the cumulative level of and outlook for surplus cash flow, the cash balance point and the maintenance of a strong investment grade credit rating.• bp’s guidance for distributions remains unchanged. Based on bp’s current forecasts, at around $60 per barrel Brent and subject to the board’s discretion each quarter, bp expects to be able to deliver share buybacks of around $4.0 billion per annum, at the lower end of its $14-18 billion capital expenditure range, and have capacity for an annual increase in the dividend per ordinary share of around 4%. | ||
| Strong momentum in transformation to an integrated energy company | ||
| • In resilient hydrocarbons, during the second quarter bp announced the start-up of the bp-operated Mad Dog Phase 2 project and the Reliance operated KG D6-MJ project, together expected to add around 90 thousand barrels of oil equivalent per day of net production by 2025. In addition, bp’s Cherry Point refinery in the US successfully commissioned the hydrocracker improvement project and cooling water infrastructure project to improve availability and reduce costs and CO2 emissions.• In convenience and mobility, bp completed the acquisition of TravelCenters of America, adding a network of 288 sites, strategically located on major highways across the US. The deal is expected to almost double bp’s global convenience gross margin*, and bring growth opportunities in four of bp’s five transition growth* engines. In July, bp and Lekkerland extended their convenience partnership to deliver REWE To Go stores at Aral retail sites until 2028. And during the first half 2023 bp grew energy sold from EV charging by around 170% compared to the first half 2022.• In low carbon energy, bp was awarded the rights to develop two offshore wind projects, with total potential generating capacity of 4GW, in the German tender round, marking its entry into offshore wind in continental Europe. In addition, bp has made significant progress growing its pipeline of hydrogen projects to reach 2.8mtpa at the end of the second quarter. |
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| In the second quarter bp has continued to execute against its unchanged financial frame. We have increased our dividend by 10%; we are investing with discipline to advance our strategy; and we are committed to returning 60% of 2023 surplus cash flow through share buybacks with a further $1.5 billion announced for the second quarter. |
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| Murray AuchinclossChief financial officer |
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| The commentary above contains forward-looking statements and should be read in conjunction with the cautionary statement on page 41. |
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Financial results
In addition to the highlights on page 2:
• Profit attributable to bp shareholders in the second quarter and half year was $1.8 billion and $10.0 billion respectively, compared with a profit of $9.3 billion and a loss of $11.1 billion in the same periods of 2022.
– After adjusting profit attributable to bp shareholders for inventory holding losses* and net impact of adjusting items*, underlying replacement cost profit* for the second quarter and half year was $2.6 billion and $7.6 billion respectively, compared with $8.5 billion and $14.7 billion for the same periods of 2022. This reduction in underlying replacement cost profit for the second quarter and half year reflects lower oil and gas realizations, the impact of portfolio changes in oil production & operations, significantly lower refining margins, and a weak oil trading performance, partly offset by a higher gas marketing and trading result.
– Adjusting items in the second quarter and half year had a net adverse pre-tax impact of $0.6 billion and a net favourable pre-tax impact of $3.3 billion respectively, compared with an adverse pre-tax impact of $0.3 billion and $31.1 billion in the same periods of 2022.
– Adjusting items for the second quarter and half year of 2023 include a favourable impact of pre-tax fair value accounting effects*, relative to management’s internal measure of performance, of $1.1 billion and $5.3 billion respectively, compared with an adverse pre-tax impact of $0.8 billion and $6.6 billion in the same periods of 2022. This is primarily due to a decline in the forward price of LNG during the periods, but an increase in the comparative periods. Under IFRS, reported earnings include the mark-to-market value of the hedges used to risk-manage LNG contracts, but not of the LNG contracts themselves. The underlying result includes the mark-to-market value of the hedges but also recognizes changes in value of the LNG contracts being risk managed.
– Adjusting items for the half year 2022 include a pre-tax charge of $24.0 billion relating to bp’s decision to exit its 19.75% shareholding in Rosneft. A further $1.5 billion pre-tax charge relating to bp’s decision to exit its other businesses with Rosneft in Russia is also included.
• The effective tax rate (ETR) on RC profit or loss* for the second quarter and half year was 41% and 32% respectively, compared with 33% and -62% for the same periods in 2022. Excluding adjusting items, the underlying ETR* for the second quarter and half year was 43% and 41% respectively, compared with 29% and 30% for the same periods a year ago. The higher underlying ETR for the second quarter and half year reflects changes in the geographical mix of profits and the UK Energy Profits Levy on North Sea profits. ETR on RC profit or loss and underlying ETR are non-IFRS measures.
• Operating cash flow* for the second quarter and half year was $6.3 billion and $13.9 billion respectively, compared with $10.9 billion and $19.1 billion for the same periods in 2022, consistent with the movements in underlying replacement cost profit in the periods.
• Capital expenditure* in the second quarter and half year was $4.3 billion and $7.9 billion respectively, compared with $2.8 billion and $5.8 billion in the same periods of 2022, reflecting the inorganic $1.1 billion spend on the acquisition of TravelCenters of America in the second quarter 2023.
• Total divestment and other proceeds for the second quarter and half year were $0.1 billion and $0.9 billion respectively, compared with $0.7 billion and $1.9 billion for the same periods in 2022. There were no other proceeds for the second quarter and half year of 2023. Other proceeds for the second quarter and half year of 2022 were $0.4 billion and $0.6 billion respectively of proceeds from the disposal of a loan note related to the Alaska divestment.
• At the end of the second quarter, net debt* was $23.7 billion, compared with $21.2 billion at the end of the first quarter 2023 and $22.8 billion at the end of the second quarter 2022.
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Analysis of RC profit (loss) before interest and tax and reconciliation to profit (loss) for the period
| Second | First | Second | First | First | |||
| quarter | quarter | quarter | half | half | |||
| $ million | 2023 | 2023 | 2022 | 2023 | 2022 | ||
| RC profit (loss) before interest and tax | |||||||
| gas & low carbon energy | 2,289 | 7,347 | 2,737 | 9,636 | 1,213 | ||
| oil production & operations | 2,568 | 3,317 | 7,237 | 5,885 | 11,068 | ||
| customers & products | 555 | 2,680 | 3,531 | 3,235 | 5,512 | ||
| other businesses & corporate | (297) | (90) | (1,028) | (387) | (25,747) | ||
| Of which: | |||||||
| other businesses & corporate excluding Rosneft | (297) | (90) | (1,028) | (387) | (1,714) | ||
| Rosneft | – | – | – | – | (24,033) | ||
| Consolidation adjustment – UPII* | (30) | (22) | (21) | (52) | 13 | ||
| RC profit (loss) before interest and tax | 5,085 | 13,232 | 12,456 | 18,317 | (7,941) | ||
| Finance costs and net finance expense relating to pensions and other post-retirement benefits | (859) | (785) | (539) | (1,644) | (1,183) | ||
| Taxation on a RC basis | (1,724) | (3,573) | (3,988) | (5,297) | (5,681) | ||
| Non-controlling interests | (161) | (204) | (279) | (365) | (593) | ||
| RC profit (loss) attributable to bp shareholders* | 2,341 | 8,670 | 7,650 | 11,011 | (15,398) | ||
| Inventory holding gains (losses)* | (732) | (600) | 2,146 | (1,332) | 5,647 | ||
| Taxation (charge) credit on inventory holding gains and losses | 183 | 148 | (539) | 331 | (1,376) | ||
| Profit (loss) for the period attributable to bp shareholders | 1,792 | 8,218 | 9,257 | 10,010 | (11,127) |
Analysis of underlying RC profit (loss) before interest and tax
| Second | First | Second | First | First | |||
| quarter | quarter | quarter | half | half | |||
| $ million | 2023 | 2023 | 2022 | 2023 | 2022 | ||
| Underlying RC profit (loss) before interest and tax | |||||||
| gas & low carbon energy | 2,233 | 3,456 | 3,080 | 5,689 | 6,675 | ||
| oil production & operations | 2,777 | 3,319 | 5,902 | 6,096 | 10,585 | ||
| customers & products | 796 | 2,759 | 4,006 | 3,555 | 6,162 | ||
| other businesses & corporate | (170) | (296) | (201) | (466) | (460) | ||
| Of which: | |||||||
| other businesses & corporate excluding Rosneft | (170) | (296) | (201) | (466) | (460) | ||
| Rosneft | – | – | – | – | – | ||
| Consolidation adjustment – UPII | (30) | (22) | (21) | (52) | 13 | ||
| Underlying RC profit before interest and tax | 5,606 | 9,216 | 12,766 | 14,822 | 22,975 | ||
| Finance costs and net finance expense relating to pensions and other post-retirement benefits | (740) | (681) | (509) | (1,421) | (995) | ||
| Taxation on an underlying RC basis | (2,116) | (3,368) | (3,527) | (5,484) | (6,691) | ||
| Non-controlling interests | (161) | (204) | (279) | (365) | (593) | ||
| Underlying RC profit attributable to bp shareholders* | 2,589 | 4,963 | 8,451 | 7,552 | 14,696 |
Reconciliations of underlying RC profit attributable to bp shareholders to the nearest equivalent IFRS measure are provided on page 1 for the group and on pages 6-15 for the segments.
Operating Metrics
| Operating metrics | First half 2023 | vs First half 2022 | ||
| Tier 1 and tier 2 process safety events* | 20 | -4 | ||
| Reported recordable injury frequency* | 0.237 | +23.8% | ||
| upstream* production(a) (mboe/d) | 2,301 | +3.4% | ||
| upstream unit production costs*(b) ($/boe) | 5.94 | -9.1% | ||
| bp-operated upstream plant reliability* | 95.0% | -0.3 | ||
| bp-operated refining availability*(a) | 95.9% | 1.5 |
(a) See Operational updates on pages 6, 9 and 11. Because of rounding, upstream production may not agree exactly with the sum of gas & low carbon energy and oil production & operations.
(b) Mainly reflecting impact of portfolio changes.
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Outlook & Guidance
Macro outlook
• For the third quarter, bp expects oil prices to be supported by seasonal demand and the OPEC+ production restrictions.
• During the third quarter, bp expects the risk of an earlier than normal seasonal fill of European gas storage to continue to weigh on European gas and Asian LNG prices absent disruptions to supply. In the US, Henry Hub gas prices are expected to find support from coal-to-gas switching in the power sector.
• In the third quarter, bp expects industry refining margins to remain above historical average levels, supported by low product inventories and seasonal demand in the US.
3Q23 guidance
• Looking ahead, bp expects third-quarter 2023 reported upstream* production to be broadly flat compared to second quarter 2023. Within this, bp expects production from oil production & operations to be lower and gas & low carbon energy to be higher, including the effects of seasonal maintenance in higher margin regions offset by major project* delivery.
• In its customers business, bp expects seasonally higher volumes. In refining, bp expects a lower level of turnaround and maintenance activity compared to the second quarter.
2023 guidance
In addition to the guidance on page 2:
• bp now expects both reported and underlying upstream production to be higher compared with 2022. Within this, bp expects underlying production* from oil production & operations to be higher and production from gas & low carbon energy to be slightly lower. bp now expects four major project start-ups during 2023, with Greater Tortue Ahmeyim (GTA) Phase 1 now expected to start-up during the first quarter of 2024.
• bp continues to expect the other businesses & corporate underlying annual charge to be in a range of $1.1-1.3 billion for 2023. The charge may vary from quarter to quarter.
• bp continues to expect the depreciation, depletion and amortization to be slightly above 2022.
• bp continues to expect the underlying ETR* for 2023 to be around 40% but it is sensitive to the impact that volatility in the current price environment may have on the geographical mix of the group’s profits and losses.
• Having realized $16.8 billion of divestment and other proceeds since the second quarter of 2020, bp continues to expect divestment and other proceeds of $2-3 billion in 2023 and continues to expect to reach $25 billion of divestment and other proceeds between the second half of 2020 and 2025.
• bp continues to expect Gulf of Mexico oil spill payments for the year to be around $1.3 billion pre-tax including the $1.2 billion pre-tax payment made during the second quarter.
• bp continues to expect capital expenditure* of $16-18 billion in 2023 including inorganic capital expenditure*.
• bp is committed to maintaining a strong investment grade credit rating, targeting further progress within an ‘A’ grade credit rating. For 2023 bp continues to intend to allocate 40% of surplus cash flow* to further strengthening the balance sheet.
• For 2023 and subject to maintaining a strong investment grade credit rating, bp remains committed to using 60% of surplus cash flow for share buybacks.
• In setting the dividend per ordinary share and buyback each quarter, the board will continue to take into account factors including the cumulative level of and outlook for surplus cash flow, the cash balance point* and the maintenance of a strong investment grade credit rating.
• Based on bp’s current forecasts, at around $60 per barrel Brent and subject to the board’s discretion each quarter, bp continues to expect to be able to deliver share buybacks of around $4.0 billion per annum, at the lower end of its $14-18 billion capital expenditure range, and have capacity for an annual increase in the dividend per ordinary share of around 4%.