In 2020, BP set out its ambition to become a net-zero emissions company “by 2050 or sooner”.
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BP shares rose 6% on Tuesday after the oil giant stepped up the pace of buybacks and raised its dividend, despite a decline in annual profits.
The energy major has increased the pace of share buybacks, announcing plans to execute a $1.75 billion share buyback ahead of the release of first-quarter results. The company said it was committed to announcing a $3.5 billion share buyback for the first half of the year.
BP also announced a dividend per common share of 7.27 cents for the final three months of 2023, marking a 10% increase from the same period a year earlier.
The oil giant reported underlying replacement cost profit, used as a proxy for net profit, of $13.8 billion for 2023, a sharp decline from the previous year’s record of $27.7 billion. According to a consensus compiled by LSEG, analysts had forecast net income of $13.9 billion for full-year 2023.
BP reported fourth-quarter net profit of nearly $3 billion, beating analysts’ expectations of $2.6 billion.
As the oil major’s London-listed shares climbed towards the top of the pan-European Stoxx 600 index on Tuesday morning, analysts at RBC Capital Markets described BP’s commitment to buybacks of its own shares beyond the first quarter of 2024 as a “ welcome positive surprise.”
They added that BP’s plan to carry out share buybacks of at least $14 billion by 2025, subject to maintaining a strong investment grade rating, was probably not expected by the market.
“With BP setting specific EBITDA targets for 2025, which are also above consensus expectations, we believe the commitment on the payments front shows confidence in future delivery,” RBC Capital Markets said in a research note . EBITDA refers to earnings before interest, taxes, depreciation and amortization.
‘Real momentum’
“Looking back, 2023 was a year of strong operational performance with real momentum in results across the business,” BP CEO Murray Auchincloss said in a statement.
“We are confident in our strategy to position ourselves as a simpler, more focused and more valuable company, committed to driving long-term value for our shareholders.”
BP said its fourth-quarter results reflected strong gas trading and “significantly lower” industry refining margins. Net debt for the period was $20.9 billion at the end of 2023, compared to $21.4 billion at the end of 2022.
British rival Shell on Thursday reported stronger-than-expected full-year profits, announcing a 4% increase in its dividend and a new $3.5 billion share buyback program.
In the United States, Exxon Mobil and Chevron both beat quarterly profit expectations, although their results also fell sharply from a year ago due to falling fossil fuel prices.
Strategy
BP’s latest results come as the company faces pressure from an activist investor over its strategy.
In a letter to BP Chairman Helge Lund and then-interim CEO 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 the Financial Times last week.
Bluebell Capital’s Giuseppe Bivona has since expressed his frustration at the “totally disappointing” performance of BP’s share price compared to its US and European peers. Bivona told CNBC’s “Squawk Box Europe” program on Jan. 30 that BP should consider deploying its capital in a “rational way.”
In response to the publication of the letter, a BP spokesperson at the time said that the company “welcomes constructive engagement” with its shareholders.
BP also struggled with a brokered leadership change. The company named Murray Auchincloss permanent CEO last month, about four months after his predecessor Bernard Looney resigned after less than four years on 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,” watered down those climate plans last year. BP said nearly a year ago that it would instead target a 20% to 30% cut, stressing that it needed to continue investing in oil and gas to meet demand.