BP, Britain's biggest company, yesterday raised its quarterly dividend and announced plans to restart share buybacks in a bold display of confidence during a volatile stock market.
Profits for the second quarter crashed by 36% to $2.2bn year-on-year as lower oil and gas prices took their toll, but chief executive Lord Browne declared optimism about the future.
He said BP would keep its targets of 5.5% growth in hydrocarbon production and underlying performance improvements would still reach $1.4bn by year end.
Although trading conditions in the second half were significantly less favourable than a year ago "our continued performance delivery had underpinned our capability to increase the dividend," he explained.
The quarterly payout was raised from 5.75 cents to 6 cents per share, giving an increase for the half year of 9% .
BP spent $1.3bn buying back its own shares last year but shelved the programme in the first half of 2002.
Lord Browne said it was being revived "while the trading environment is above mid-cycle", pointing out that BP had already won permission from shareholders to purchase up to 10% of its own equity.
The $2.2bn pro-forma result, adjusted for special items, brought the first-half result to $3.7bn, nearly a half of what it was 12 months earlier. The main culprit was the $4-per-barrel reduction in the price of crude, and a $2-per-thousand cubic feet reduction in the price of gas. Since then commodity prices have bounced back, giving BP a better second-quarter result than the one covering the first three months.
Cash flow remained strong and BP reduced its net debt to equity gearing below the 25% to 35% target range, despite acquisitions and planned capital spending for the year of nearly $13bn.
There was a better performance from the battered chemicals division and BP made some profit out of selling petrol on the UK forecourt, although it would not say how much.
The turnover from "convenience sales" - such as sandwiches and drinks from shops at its petrol stations - are now worth $5bn a year.
The overall refining and marketing business had a tough second quarter with profits down 61% on 12 months earlier.
The end of year result will be boosted by new fields coming on stream while income from divestments will be doubled to $5bn, mainly as a result of its Ruhrgas stake disposal to E.ON of Germany.
The full-year result will be damaged by the introduction of new North Sea taxes. Finance director John Buchanan said BP would be forced to take a tax writedown amounting to almost $600m and take an ongoing $200m hit every 12 months after that.