On Tuesday, BP, a major oil company, announced profits for the first quarter which exceeded expectations. While the profits were higher than the previous three months, they were lower compared to the remarkable levels achieved during the exceptional performance of 2022, when fossil fuel prices soared following Russia's full-scale invasion of Ukraine.
BP reported an underlying replacement cost profit of $4.96 billion for the first quarter, which is used as a measure for net profit.
This figure is higher than the $4.8 billion profit recorded in the previous quarter but lower than the $6.2 billion profit in the first quarter of 2022. Analysts, as per Refinitiv, had anticipated BP to report a first-quarter profit of $4.3 billion.
BP attributed its strong first-quarter earnings to substantial oil and gas trading activities. The company also declared an additional share buyback program worth $1.75 billion, with the aim to finalize it before releasing its second-quarter 2023 results in early August. Moreover, BP confirmed the completion of its previously announced $2.75 billion share buyback on April 28.
However, despite these announcements, shares of BP listed on the London Stock Exchange experienced a 6% decline around 1:50 p.m. London time, placing them towards the lower end of the pan-European Stoxx 600 index.
“This has been a quarter of strong performance and strategic delivery as we continue to focus on safe and reliable operations, and importantly we continue to deliver for shareholders, through disciplined investment, lowering net debt and growing distributions.” BP CEO Bernard Looney
BP anticipates conducting share buybacks of approximately $4 billion annually, which falls within the lower range of its capital expenditure range of $14 billion to $18 billion. Additionally, the company has the capability to increase the dividend per ordinary share by approximately 4% each year.
BP maintained its dividend at 6.61 cents per ordinary share for the first quarter, the same as the previous quarter, after a 10% increase in February.
In terms of financial position, BP reported a net debt of $21.2 billion for the first quarter, which marks a decrease from $27.5 billion compared to the same period in the previous year.
Following a period of fluctuating oil and gas prices, the first-quarter outcomes arrive on the heels of a remarkable year for major oil companies. In 2022, these energy giants shattered previous annual records in terms of profits.
Specifically, BP reported annual profits of $27.7 billion in the previous year, surpassing the profits recorded in 2021 by more than double. This achievement set a new annual profit record for the oil company, surpassing its previous high of $26.3 billion in 2008.
In the face of criticism, executives from major oil companies have defended their substantial profits, emphasizing the significance of energy security during the transition away from fossil fuels. They have also suggested that higher taxes could discourage investment.
BP, an early adopter of the goal to achieve net-zero emissions by 2050 or earlier, announced plans to revise its emission reduction targets after posting record profits.
During the meeting, a shareholder group representing 17% of the shares (up from 15% the previous year but down from 21% in 2021) voted in favor of a resolution proposed by Dutch group Follow This. The resolution compelled BP to align its emissions reduction targets for 2030 with the Paris Agreement.
French oil company Total Energies began the Big Oil earnings season by revealing first-quarter results that matched analysts' expectations. The company experienced a 27% decline in net income to $6.5 billion in the first three months of 2023, partially due to lower fossil fuel prices.
The quarterly earnings reports of British company Shell and Norwegian company Equinor are scheduled to be released on Thursday,4th May.
