BP shares rose 6 per cent on Tuesday after the oil giant accelerated the pace of share buybacks and increased its dividend, CNBC reports.
The energy company stepped up the pace of share repurchases, announcing its intention to conduct a $1.75 billion share buyback before reporting first-quarter results. The company intends to announce $3.5 billion in share repurchases in the first half of the year.
BP also declared a dividend per ordinary share of 7.27 cents for the last three months of 2023, up 10 per cent from the same period last year.
The oil giant posted underlying cost replacement earnings, used as a proxy for net income, of $13.8 billion for 2023, down significantly from a record $27.7 billion in the previous year. Analysts had expected net income for the full year 2023 to be $13.9 billion, according to the LSEG consensus.
BP announced fourth-quarter net income of nearly $3 billion, beating analysts’ expectations of $2.6 billion.
On Tuesday morning, as the London-listed oil company’s shares soared to the top of the pan-European Stoxx 600 index, analysts at RBC Capital Markets called BP’s commitment to buy back shares after the first quarter of 2024 a “pleasant positive surprise.”
They added that BP’s plan to repurchase at least $14bn worth of shares by 2025, assuming it maintains a high investment grade rating, was probably not expected by the market. RBC Capital Markets said in a research note:
With BP putting out 2025 specific EBITDA targets, which are also above consensus expectations, the commitment on the payout front shows confidence in future delivery, we think.
EBITDA refers to earnings before interest, taxes, depreciation and amortization. BP CEO Murray Auchincloss said in a statement:
Looking back, 2023 was a year of strong operational performance with real momentum in delivery right across the business. 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.
BP officials said the fourth-quarter results reflected strong gas trading volumes and “significantly lower” refining margins in the industry. Net debt for the period was $20.9 billion at the end of 2023, compared with $21.4 billion at the end of 2022.
British rival Shell on Thursday reported better-than-expected full-year profits. It announced a 4% dividend hike and a new $3.5 billion share buyback programme.
In the US, Exxon Mobil and Chevron beat expectations on quarterly earnings, although their results also fell sharply from a year ago amid lower fossil fuel prices.
BP’s latest results come at a time when the company is facing pressure from an activist investor over its strategy.
In October, Bluebell Capital Partners sent a letter to BP chairman Helge Lund and then acting CEO Murray Auchincloss, urging the company to increase investment in oil and gas and cut back on clean energy spending.
Bluebell Capital’s Giuseppe Bivona has since expressed his disappointment with BP’s “totally unsatisfactory” share price performance compared to the company’s US and European peers.
On 30 January, Bivona told CNBC’s Squawk Box Europe programme that BP should consider a “rational allocation of its capital”. In response to the publication of the letter, a BP spokesperson said that the company “welcomes constructive engagement” with its shareholders.
BP has also seen a change in leadership prompted by mediatisation. The company appointed Murray Auchincloss as permanent CEO last month, some four months after his predecessor Bernard Looney stepped down after less than four years in the post.
Under Looney’s leadership, BP promised to reduce overall emissions by 35 to 40 per cent by the end of the decade.
The company, which was one of the first energy giants to announce plans to cut emissions to zero “by 2050 or sooner”, last year softened those climate plans. Almost a year ago, BP said it would instead aim to cut emissions by 20-30 per cent, saying it needed to continue investing in oil and gas to meet demand.
