6th Feb 2024 10:39
(Alliance News) - Shareholders were happy with BP PLC on Tuesday, after it promised that it is sticking to its commitment to share buybacks despite a drop in quarterly profit.
"A big plunge in BP's profit year-on-year is not really big news. Volatile oil prices will inevitably feed through to the company's bottom line. It is also worth remembering that last year's profit represented a record level," said AJ Bell's Russ Mould.
"The fact BP's latest profit beat expectations makes this a solid start for Murray Auchincloss as its new chief executive. A big share buyback is also helping to get investors on side, as the new boss demonstrates his commitment to returning cash to shareholders."
Shares in the London-based oil major rose 5.7% to 480.20 pence each on Tuesday morning in London. They rose to the top of the FTSE 100 index.
BP said revenue fell to USD52.59 billion in the fourth quarter of 2023 from USD70.36 billion a year earlier. Quarterly pretax profit dived to USD1.10 billion from USD16.90 billion.
BP posted underlying replacement cost profit of USD2.99 billion for the fourth quarter, down 38% from USD4.81 billion a year before but outperforming analyst consensus of USD2.77 billion by 8.0%.
RC pretax profit slumped to USD3.57 billion, down sharply from USD19.15 billion a year ago and an under-performance of 39% to analyst consensus of USD5.86 billion.
The decline reflects average Brent crude oil prices falling by 18% to USD82.64 per barrel in 2023 from USD101.32 in 2022, according to market prices cited by BP.
For all of 2023, revenue dropped by 14% to USD213.03 billion from USD248.89 billion in 2022. However, pretax profit jumped by 54% to USD23.75 billion from USD15.41 billion.
Pretax profit rose despite the fall in revenue as BP spent USD119.31 billion on purchases in 2023, down 15% from USD141.04 billion in 2022. Furthermore, net impairment and loss on sale of businesses narrowed significantly to USD5.86 billion from USD30.52 billion.
Underlying RC profit, meanwhile, dived 50% to USD13.84 billion in 2023 from USD27.65 billion in 2022.
interactive investor's Richard Hunter commented: "The numbers themselves inevitably echo the themes which the other global majors have reported, such as a volatile price especially towards the end of the year, as well as lower industry refining margins.
"For BP there was also some weakness in oil trading as a result of this volatility, but more positively stronger gas trading and marketing and higher oil realisations cushioned some of the financial pain."
Despite the lower profitability, BP declared a quarterly dividend per share of 7.27 US cents, up 10% from 6.61 US cents the year before. This brings the full-year dividend to 28.42 US cents, up 18% from 24.08 cents.
BP said it completed its USD1.5 billion share buyback on Friday, and now intends to initiate a new USD1.75 billion buyback, prior to reporting its first quarter results which are due on May 7. It intends to buy back USD3.5 billion in shares for the first half of 2024.
BP added that it plans to conduct share buybacks worth at least USD14 billion through 2025, as part of its commitment to return at least 80% of surplus cash flow to shareholders.
Susannah Streeter at Hargreaves Lansdown said the buyback "shows the immediate focus is on boosting the share price and returning value to shareholders."
Chief Executive Murray Auchincloss said: "Looking back, 2023 was a year of strong operational performance with real momentum in delivery right across the business. And as we look ahead, our destination remains unchanged – from international oil company to integrated oil company – focused on growing the value of BP. We are confident in our strategy, on delivering as a simpler, more focused and higher-value company, and committed to growing long-term value for our shareholders."
AJ Bell's Mould noted: "Auchincloss acknowledges BP can be a 'simpler, more focused and higher-value company' and that's a manifesto most could get on board with. How exactly the company gets there and what that means for the various parts of the business remains to be seen. The devil will be in the detail.
"It is striking that while oil and gas production is expected to rise this year, output from environmentally friendly sources is expected to fall."
This was the first set of annual results for BP under Auchincloss and new Chief Financial Officer Kate Thomson. Auchincloss, previously CFO, was made interim CEO back in September after the departure of Bernard Looney under a cloud. Thomson became interim CFO at the same time. Both were confirmed as permanent in their roles last month.
interactive investor's Richard Hunter said that having a permanent CEO "removes one plank of uncertainty" for BP.
By Sophie Rose, Alliance News senior reporter
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