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| BP Battles Volatility for Profit, Announces Share Buyback Boost |
BP, the British energy major, defied expectations yesterday, posting a higher-than-expected annual profit despite volatile energy prices. While results fell short of the record highs set in 2023, investors cheered the news, sending BP's American Depositary Receipts up 6.3%. This resilience mirrors similar performances by global oil and gas giants like Shell, ExxonMobil, and Chevron, showcasing the industry's ability to weather market fluctuations.
BP reported an underlying replacement cost profit of $13.84 billion for the full year, falling significantly from the previous year's $27.65 billion. This decline reflects lower oil and gas realizations, portfolio changes, and narrower refining margins. However, the figure exceeded analyst expectations, demonstrating BP's ability to navigate market volatility.
The fourth quarter saw a dip in underlying replacement cost profit from $3.29 billion to $2.99 billion. Despite this, strong gas trading and higher oil realization helped offset lower refining margins and weak oil trading. Notably, income from gas and low-carbon energy saw a healthy rise, indicating progress in BP's diversification efforts.
BP remains committed to its transformation into an integrated energy company, investing heavily in low-carbon activities while aiming to reduce oil and gas production by 25% by 2030. However, the sudden departure of former CEO Bernard Looney, the architect of this strategy, coupled with lagging share price compared to peers, has sparked speculation about a potential change in direction.
BP announced a significant increase in its share buyback program, allocating $1.75 billion for the first quarter of 2024, up from $1.5 billion previously. This commitment to returning value to shareholders is further reinforced by a maintained dividend payout of 7.27 cents per share.
While BP seems determined to continue its low-carbon transition, investor pressure could mount if share price performance continues to lag and management fails to deliver consistent returns. Activist investor Bluebell Capital urges BP to slow down its transition, arguing that relying solely on oil and gas is still essential for the present. BP maintains its confidence in its strategy and welcomes investor feedback, emphasizing its commitment to long-term shareholder value.
