BP in 2020 set out its ambition to become a net zero company “by 2050 or sooner”.
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BP shares rose 6% on Tuesday after the oil giant stepped up its pace of acquisitions and raised its dividend, despite a drop in annual profits.
The energy major has increased the pace of its share buybacks, announcing its intentions to repurchase $1.75 billion of shares before reporting first-quarter results. The company said it committed to announce a $3.5 billion share buyback for the first half of the year.
BP also announced a dividend of 7.27 cents per common share for the final quarter of 2023, a 10% increase compared to the same period last year.
The oil giant posted underlying replacement cost profit, used as a measure of net profit, of $13.8 billion for 2023, a sharp drop from a record $27.7 billion the previous year. Analysts had expected net profit of $13.9 billion for the full year 2023, according to a consensus compiled by LSEG.
BP reported fourth-quarter net profit of nearly $3 billion, beating analysts’ expectations of $2.6 billion.
As the London-listed oil major’s stock soared to the top of the pan-European Stoxx 600 on Tuesday morning, analysts at RBC Capital Markets described BP’s commitment to share buybacks after the first quarter of 2024 as a “welcome positive surprise”.
They added that BP’s plan to buy back at least $14 billion of shares by 2025, subject to maintaining a strong investment-grade rating, was likely not expected by the market.
“With BP setting specific EBITDA targets for 2025, which are also above consensus expectations, the engagement on the payments front shows confidence in future delivery, we believe,” RBC Capital Markets said in a research note. EBITDA refers to earnings before taxes, interest and depreciation.
“Real Momentum”
“Looking back, 2023 was a year of strong operational performance with real momentum in delivery across the business,” BP chief executive Murray Auchincloss said in a statement.
“We are confident in our strategy, in delivering as a simpler, more focused and higher-value company, and are committed to increasing long-term value for our shareholders.”
BP said its fourth-quarter results reflected strong natural gas trading and the industry’s “significantly lower” refining margins. Net debt for the period stood at $20.9 billion at the end of 2023, up from $21.4 billion at the end of 2022.
In the US, Exxon Mobil and Chevron beat quarterly earnings expectations, although their results also fell sharply from a year ago amid weaker fossil fuel prices.
Strategy
BP’s latest results come as a company is facing pressure from an activist investor over its strategy.
In a letter to BP chairman Helge Lund and then-interim chief executive Murray Auchincloss in October, Bluebell Capital Partners urged the company to increase its investments in oil and gas and reduce spending on clean energy. The letter was first reported by Financial Times Last week.
Bluebell Capital’s Giuseppe Bivona has since expressed his disappointment at the “absolutely underwhelming” performance of BP’s share price relative to the company’s US and European peers. Bivona told CNBC’s “Squawk Box Europe” on Jan. 30 that BP should consider growing its capital in a “rational way.”
In response to the publication of the letter, a BP spokesman said at the time that the company “welcomes constructive engagement” with its shareholders.
BP also faced a brokered leadership change. The company appointed Murray Auchincloss as permanent chief executive last month, around four months after his predecessor Bernard Looney stepped down after less than four years in the job.
Under Looney’s leadership, BP promised that its overall emissions would be 35% to 40% lower by the end of the decade.
The company, which was one of the first energy giants to announce plans to reduce emissions to net zero “by 2050 or sooner”, downplayed those climate plans last year. BP he said nearly a year ago that it would instead aim for a 20% to 30% cut, noting that it needed to continue investing in oil and gas to meet demand.