BP beats Q4 profit forecast, increases share buybacks

BP (BP.L) reported fourth-quarter earnings of $3 billion on Tuesday, exceeding forecasts thanks to strong gas trading, and increased the pace of its share repurchases in a sign of confidence in a strategy questioned by investors.

The company’s shares rose by more than 5 per cent in early London trading following the unexpected boost to the buyback programme.

The quarterly results lifted the energy giant’s 2023 profit to $13.8 billion, half that of a year earlier as oil and gas prices cooled and refining profit margins weakened.

The strong quarterly profit will come as a relief to CEO Murray Auchincloss after the company substantially missed forecasts in the previous two quarters.

Auchincloss became permanent CEO in January after being named interim CEO on Sept. 12 when Bernard Looney abruptly stepped down for failing to fully disclose details of past personal relationships with colleagues.

Auchincloss told Reuters BP remains committed to reducing oil and gas output and sharply growing its renewables and low-carbon businesses by the end of the decade.

“As we drive towards 2025 we are going to focus on simplifying the business,” he said.

BP’s shares have underperformed rivals in recent months amid investor concerns over its strategy and the leadership upheaval.

The company said it was committed to repurchasing $3.5 billion of shares in the first half of 2024 and expects to purchase $14 billion over 2024-2025.

“BP delivers what investors were asking for: higher distributions and more visibility,” Jefferies analyst Giacomo Romeo said in a note.

STRONG TRADING

Rivals Exxon Mobil (XOM.N), Chevron (CVX.N) and Shell (SHEL.L) last week beat profit expectations on a mix of strong trading results and higher oil and gas production although refining margins weighed on the sector amid sluggish global economic activity.

BP’s fourth-quarter underlying replacement cost profit, the company’s definition of net income, reached $2.99 billion, exceeding forecasts of $2.77 billion in a company-provided survey of analysts.

That compared with a $3.3 billion profit in the third quarter and $4.8 billion a year earlier.

BP said the results reflected strong gas trading in the quarter and higher oil and gas prices which were nevertheless offset by “significantly lower” refining margins, weak oil trading and exploration impairments.

It maintained its dividend at 7.27 cents per share and increased the rate of its share buybacks to $1.75 billion over the next three months from $1.5 billion in the previous three.

Capital expenditure in 2023 was unchanged from a year earlier at $16.3 billion, and is expected to dip to $16 billion this year.

BP generated more than $32 billion of cash last year, compared with $41 billion in 2022. It reduced net debt to $20.9 billion by year-end, the lowest in a decade, from $21.4 billion 12 months earlier.