By Christian Moess Laursen
BP increased its buyback and posted higher-than-expected annual profit, joining other oil-and-gas giants in showing resilience despite volatile energy prices, although results still dropped from the prior-year's record highs.
The British energy major on Tuesday reported $13.84 billion in full-year underlying replacement cost profit--a similar metric to net income that U.S. oil companies report--down significantly from $27.65 billion in the year before when soaring energy demand supercharged prices following Russia's invasion of Ukraine.
The result, which edged above a consensus forecast of $13.83 billion compiled by Visible Alpha, was due to lower realizations, portfolio changes, lower refining margins and lower oil trading, the company said.
Oil majors have faced volatile energy prices during the year, especially in the fourth quarter, but strong gas trading and persistent demand for oil helped U.K. rival Shell and U.S. peers Exxon and Chevron to post healthy profits last week. Shell reported $20.28 billion, while Exxon and Chevron posted $36 billion and $21.37 billion, respectively.
For the quarter, BP booked $2.99 billion in underlying replacement cost profit, down from $3.29 billion in the preceding quarter, but above a consensus forecast of $2.77 billion compiled by the company. Before interest and taxes, BP's replacement cost profit fell to $3.57 billion from $6.69 billion, below consensus's $5.86 billion.
The quarterly result reflects strong gas trading and higher oil realization, offset by lower refining margins and weak oil trading, the London-based company said.
The bulk of the profit came from gains in oil production and operations, where profit before interest and taxes rose to $3.55 billion from $3.14 billion, while income from gas and low-carbon energy increased to $1.78 billion from $1.26 billion.
"2023 was a year of strong operational performance with real momentum in delivery right across the business," Chief Executive Murray Auchincloss said.
BP is aiming to turn itself into an integrated energy company, away from its image as oil major, and to invest more in low-carbon activities.
However, the sudden departure of this strategy's architect, former boss Bernard Looney, along with poor share-price performance relative to oil peers, has sparked speculation on a change in direction.
For now, BP has shown few signs of ditching the policy, but that could change if the share price continued to underperform, and management failed to deliver decent returns, CMC Markets analyst Michael Hewson said in a recent market comment.
In addition, activist investor Bluebell Capital has urged the company to slow its commitment to reduce oil and gas production by 25% by 2030, asserting BP is trying to make the shift too quickly.
"As we look ahead, our destination remains unchanged--from integrated oil company to integrated energy company--focused on growing the value of BP," Auchincloss said. "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 intends to buy back $1.75 billion worth of shares in the first three months of the year, higher than the preceding quarter's $1.5 billion, and aims for a total of $3.50 billion in the first half. Dividends were kept at 7.27 cents, matching the preceding quarter's payout.
Looking ahead, the FTSE 100-listed group expects higher upstream production and lower refining margins in the first quarter. For the full year, it expects to produce more oil and less gas and low-carbon energy.
Lowest net debt level for a decade.
3.5 bln in 1h, 1.75 provide near term predictability
Write to Christian Moess Laursen at christian.moess@wsj.com
(END) Dow Jones Newswires
02-06-24 0436ET
