BP oil rig

BP is rewarding investors with a higher dividend and more share buybacks as it swung to a half-year profit on rebounding oil prices.

The FTSE 100 oil giant, a stalwart of pension pots, is increasing its quarterly payout by 4pc to 5.46 cents a share and plans a £1bn share buyback before November.

It expects to be able to buy back shares worth about $1bn a quarter and raise the dividend by about 4pc a year until 2025 with oil at an average of $60 a barrel.

Profits of $5.7bn for the first six months of the year mark a turnaround from an $18.3bn loss a year ago, thanks to a sharp recovery in the cost of crude. Brent has climbed from $44 last August to more than $70.

Last week, oil prices also helped rival Shell raise its dividend 40pc and announce $2bn of buybacks.

The boom for their fossil fuel businesses comes as both companies try to switch towards lower carbon products as western economies try to cut their reliance on fossil fuels.

Oil majors have argued that cash from from their oil and gas businesses is needed to invest in renewables.

BP shares rose 4pc to 301p but remain well below pre-pandemic levels of more than 450p.

Bernard Looney, chief executive, said the company had "delivered another quarter of strong performance while investing for the future in a disciplined way".

"This shows we continue to perform while transforming BP – generating value for our shareholders today while we transition the company for the future."

"What you’re seeing around the dividend is really a story of confidence. Confidence in the underlying performance of the business, confidence in the balance sheet," he told Bloomberg TV.

BP plans to cut its own oil and gas production by 40pc by 2030 and build 50 gigawatts of renewable power capacity by 2030.

It is bidding for space in Scotland's latest offshore leasing round that could support up to 2.9 gigawatts, saying it would lead to billions of pounds of investment in the area.

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Mr Looney said BP was "investing with discipline" into lower carbon energy, and had rejected 50 gigawatts of potential deals.

He added the company was not against doing deals in oil and gas as long as they were good value and environmentally efficient: "There's not a strategic no to doing oil and gas deals inside the company. If we see deals that make sense, we will do so."

Mr Looney’s pledges on shareholder rewards go further than the distributions policy BP outlined earlier this year. The turnaround reflects the impact of higher energy prices, but also demands from shareholders who were unhappy with the company’s plans.

"Twelve months on from when we laid out our strategy, of course the world’s in a very different place," he said. "Global GDP is now back to pre-pandemic levels, the vaccines clearly are working".

Analysts at Barclays said BP's strategy was progressing well.

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