As BP PLC (LSE:BP.) shareholders cheer higher dividends, summer forest fires in the United States put a particularly poignant exclamation point on climate activist messages.
Forests that generate carbon offsets for BP and other blue-chips are presently ablaze in Washington, the Financial Times reports.
BP’s financial exposure is believed to be unaffected so far due to what is known as a ‘buffer pool’, effectively a store of extra unsold credits kept to protect carbon offset schemes from such risks, though the frequency and severity of American wildfires is said to be on the rise in recent years as summer temperatures have increased.
READ: BP lifts dividend as transition effort continues
Whatever the internal mechanics and insurances, the ‘optics’ are far from ideal for an oil company that is promoting ESG and is pouring investment into projects designed to reduce its net carbon footprint.
It is a blow, symbolically if not practically, for BP along with the likes of Microsoft and Amazon which also invest in forestry-based carbon offset projects that have been affected by fire this summer.
Fires that began in July swept through the Colville Indian Reservation in Washington, where BP has spent over US$100mln on carbon offset credits, according to the FT. BP has been in close communication with its partners in the affected areas, it added.
Wildfires have also impacted similar schemes in Oregon and California.
The FT noted that there are concerns frequent future catastrophic wildfires may deplete buffer pools, representing a significant threat to forestry-based carbon offsets in the US.
American Carbon Registry, however, described that system in California, for example, as ‘robust and diversified’.
BP says it's making good progress with transition
This morning, BP announced a 4% rise in its second-quarter dividend and launched a share buyback programme as it confirmed a further strong quarterly performance.
The transitioning oil major reported a US$3.1bn profit for the three months ended June 30, compared to US$4.7bn in the prior quarter.
Underlying replacement costs profit (a preferred metric for BP) was marked at US$2.8bn, up slightly from the US$2.6bn achieved in the first three months of the year. Operating cashflow (including US$1.2bn of Gulf of Mexico oil spill payments) amounted to US$5.4bn.
The dividend increased to 5.46 US cents per share and the company plans an annual 4% increase in the shareholder pay-out each year until 2025. BP added that US$1.4bn of surplus cash generated in the first half will be used for share buybacks and going forward, it expects US$1bn of buybacks per quarter.
It comes as the oiler aims to reward and incentivise shareholders whilst the company seeks to reposition strategically.
“We are a year into executing BP's strategy to become an integrated energy company and are making good progress - delivering another quarter of strong performance while investing for the future in a disciplined way,” said chief executive Bernard Looney.
Looney added: “We continue to perform while transforming BP, generating value for our shareholders today while we transition the company for the future.”