7th May 2024 10:44
(Alliance News) - BP PLC's new share buyback and maintained dividend should provide "some solace" after first quarter profit fell short of City expectations, analysts on Tuesday said.
Shares in BP fell 0.7% to 506.90 pence in London on Tuesday.
The London-based oil major said first-quarter underlying replacement cost profit was down 45% at USD2.72 billion from USD4.96 billion a year prior. Compared to the fourth quarter, underlying RC profit was down a more modest 9.0% from USD2.99 billion.
Underlying RC profit per share was 16.24 US cents compared to 27.74 cents a year ago, and 17.77 cents in the previous quarter.
Reported RC profit was USD1.61 billion in the first quarter, down more than 80% from USD8.67 billion a year ago, though up from USD1.52 billion in the fourth quarter of 2023.
Compared with the fourth quarter of last year, the result reflects lower oil and gas realizations, the impacts of the Whiting refinery outage, and significantly weaker fuels margin, BP said.
This was partially offset by significantly lower level of turnaround activity, a strong oil trading result, and higher realized refining margins, the company added.
Total first quarter revenue was down 13% to USD48.88 billion from USD56.18 billion a year earlier, and down 6.3% from USD52.14 billion in the fourth quarter.
First quarter upstream production was 2.4 million barrels of oil equivalent per day, up 2.1% from a year earlier.
BP announced a new USD1.75 billion share buyback and an unchanged target of USD3.5 billion in buybacks for the first half of 2024. This follows a USD1.75 billion buyback announced alongside fourth quarter results, which was completed on May 3.
Along with the buyback, BP declared a first quarter dividend of 7.27 cents, unchanged from the fourth quarter, and up 10% from 6.61 cents a year ago.
Operating cash flow was USD5.01 billion, down 34% from USD7.62 billion a year ago, and down 47% from USD9.38 billion in the previous quarter.
BP said it was aiming for at least USD2 billion of cash cost savings by the end of 2026 relative to 2023.
Stuart Lamont, investment manager at RBC Brewin Dolphin, said BP missed profit expectations "on the back of lower gas prices, weaker margins, and operational outages."
But he felt the extension to the share buyback programme and maintained dividend would provide shareholders with "some solace."
He said both "suggest BP's management team sees this as a temporary setback and remains relatively optimistic about the near-term outlook."
Derren Nathan, head of equity research, Hargreaves Lansdown said the buyback and dividend shows BP can "splash the cash" even in a lower pricing environment.
He noted underlying profit was down across all divisions but the first half buy back target of USD3.5 billion remains.
Nathan also felt BP was making a difference where it can.
He highlighted a new plan to deliver cost savings of at least USD2 billion by the end of 2026 while some of the effects of lower prices have been offset by increased production.
Nathan noted new production on stream in the Caspian Sea as well as onshore US in the Permian basin, plus development activity in the North Sea and exploration in Africa.
He also highlighted progress in the low-carbon space, pointing out BP has upped its ownership of key wind projects in the US.
Closer to home its joint venture Net Zero Teesside Power is investing "big" with infrastructure contracts of around USD5 billion awarded, Nathan pointed out.
By Jeremy Cutler, Alliance News reporter
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