By Christian Moess Laursen
BP plans to cut at least $2 billion in costs after the British energy company's first-quarter profit was hit by lower prices for oil and gas sold and a U.S. refinery outage, missing market forecasts.
The London-based oil-and-gas giant said Tuesday that underlying replacement-cost profit--a metric similar to net income its U.S. peers report--was $2.72 billion, a marked decline from $4.96 billion in the same quarter last year. This missed a forecast of $2.87 billion, according to a company-compiled estimate from 24 analysts.
The result was driven by lower prices for oil and gas sold, the impacts of the outage at the Whiting refinery in Indiana--the company's biggest refinery and the biggest in the U.S. Midwest--and significantly weaker fuels margin. Stronger oil trading and higher realized refining margins only partially offset this.
BP announced it would cut at least $2 billion in costs across the business by the end of 2026 compared with 2023. The reduction would be around 10% of what it calls its controllable cost base, which was around $22.6 billion last year. BP's reported costs were around $42 billion.
The cuts follow the company's recent plan to simplify its structure and cut the executive leadership team to reduce duplication and complexity in management reporting lines.
Net debt widened to $24.0 billion from $20.9 billion at the end of the fourth quarter.
The company produced 7.6% more hydrocarbons with 1.46 million barrels of oil-equivalent barrels a day, while gas and low-carbon energy output fell 5.7% to 914,000 BOE a day through the quarter.
BP's replacement-cost before interest and tax--another closely watched metric--fell to $4.82 billion from $13.23 billion a year prior, missing the $5.83 billion forecast by consensus.
The main contribution came from the oil production and operations segment with $3.06 billion, while the gas and low-carbon energy business accounted for $1.04 billion. Both units missed consensus' forecasts.
BP is the last of the European energy majors to report first-quarter results. London-based rival Shell and European peers, such as TotalEnergies and Eni, all beat market expectations after pumping out more oil and gas shielded earnings from weak gas prices.
In the quarter, BP generated a surplus cash flow of $5.0 billion, supporting a $1.75 billion share buyback until July 30.
In addition to the buyback, it declared a dividend payout of 7.27 cents, matching the payout in the two preceding quarters.
Looking ahead, BP expects its upstream production--the extraction of crude oil and gas--to fall in the second quarter compared to the first. For the full year, its expects production to rise slightly from last year's output, driven by higher oil output offsetting a lower gas and low-carbon result.
Shares were down 0.3% at 509.10 pence at 0729 GMT.
Write to Christian Moess Laursen at christian.moess@wsj.com
(END) Dow Jones Newswires
05-07-24 0349ET
