LNG

Summit Oil and Shipping (SOSCL) has signed a Memorandum of Understanding with Commonwealth LNG, which could potentially lead to offtaking 1 mill tonnes of LNG per year for up to 20 years. 

UK-based energy giant, bp, has reported strong second quarter 2021 results and continued net debt reduction in an improving environment

The company said that operating performance was resilient in the second quarter with four major project start-ups, strong momentum in the customers business, including material growth in convenience gross margin, and delivery of $2.5 bill of cash costs savings on a run-rate basis relative to 2019, around six months earlier than targeted.

bp reported a profit for the quarter of $3.1 bill, compared with $4.7 bill for the first quarter 2021.

Underlying replacement cost profit was $2.8 bill, compared with $2.6 bill for the previous quarter. This result was driven by higher oil prices and margins offset by a lower result in gas marketing and trading.

Operating cash flow was $5.4 bill, including $1.2 bill pre-tax of Gulf of Mexico oil spill payments within a working capital build of $0.5 bill - after adjusting for inventory holding gains and fair value accounting effects.

The company’s net debt fell to $32.7 bill at the end of the second quarter.

Following the annual review of price assumptions used for investment appraisal and value-in-use impairment testing, bp's Brent oil price assumption to 2030 is increased to reflect expected supply constraints, while longer-term assumptions are lowered as bp expects an acceleration of the pace of transition to a low carbon economy.

As a result of these changed assumptions, the reported result includes a pre-tax net impairment reversal of $3 bill.

Reflecting the underlying performance of the business, an improving outlook for the environment, confidence in the balance sheet and commencement of the share buyback programme, the board has announced an increase in the second quarter dividend of 4% to 5.46 cents per ordinary share. 

This increase is accommodated within a 2021-5 average cash balance point of around $40 per barrel Brent, $11 per barrel RMM and $3 per MMBtu Henry Hub (all 2020 real).

bp generated surplus cash flow of $0.7 bill in the second quarter and $2.4 bill in the first half of this year after having reached its net debt target of $35 bill. 

Taking into account surplus cash flow generated in the first half of the year, bp intends to execute a share buyback of $1.4 bill prior to announcing its third quarter 2021 results. For 2021, and subject to maintaining a strong investment grade credit rating, the board remains committed to using 60% of surplus cash flow for share buybacks and plans to allocate the remaining 40% to continue strengthening the balance sheet.

On average, 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 buybacks of around $1 bill per quarter and have capacity for an annual increase in the dividend per ordinary share of around 4%, through 2025. 

Since outlining its new strategy a year ago, bp claimed to have made strong progress in its transformation to an IEC. It has delivered eight major projects, built a 21 GW renewable pipeline, grown convenience and electrification, reorganised, reached over $10 bill of divestment proceeds, strengthened the financial frame and begun share buybacks.

Oil Search and Santos, both leading Australian-based gas developers, have announced the conditions for their proposed merger.

Under the revised merger proposal, Oil Search shareholders will receive 0.6275 new Santos shares for each Oil Search share held via a scheme of arrangement.

The average LNG price for January delivery into Northeast Asia was estimated at about $15.60 per million British thermal units (MMBtu), up by $1.15 from the previous week.

The US exported 19 LNG cargoes last week, compared to 21 the previous week.