BP Q2 Positive On Lower Debt And Ahead Earnings & CF; Divs Increased, Buybacks Sustained

Rating: A1/A-/A+ EUR spreads muted.

• Positive results that look broadly in line with the signals sent in the trading update albeit with better-than-expected underlying earnings and cash flow while a pause to the grind higher in net debt is welcome.
  
  
• Daily production flat QoQ and +4.7% YoY (+2.2% vs. BBG consensus).
• Underlying RC profit before interest and tax -9.0% QoQ and -3.4% YoY (-2.3% vs. company-provided consensus).
• Underlying RC profit of +6.5% YoY (+8.5% vs. company-provided consensus). QoQ contributions look broadly in line with the trading update with flat oil and slightly lower gas though oil.
• OCF of USD 8.1bn +61.7% QoQ and +28.7% YoY (+17.4% vs. BBG consensus) while CapEx was -13.7% QoQ and -14.4% YoY.
• Net debt of USD 22.6bn from USD 24bn at Q124 with gearing falling from 22% to 21.6% and our calculation of EBITDA leverage rising from 0.48x to 0.55x on the back of lower EBITDA compared to H123.
• 10% dividend upgrade to 8c and sustained buyback pace for H2.
• Q3 production expected to be lower with continued sensitivity of margins including in high margin areas. FY guidance unchanged.