BP’s profit rises to $5 billion as share buyback slows

BP (BP.L) increased its earnings to $5 billion in the first quarter of 2023 on the strength of its oil and gas operations, but the price of its stock declined as the business reduced its share buyback program.

As oil majors continue to reap the benefits of strong energy prices despite some softening since the beginning of the year, BP’s results, which surpassed expectations, follow a strong showing by rivals including Exxon Mobil (XOM.N) and Chevron last week.

Despite the index of European oil companies (.SXEP) falling by roughly 1.3%, BP’s share price was down 4.5% by 09:23 GMT after the company announced it will repurchase $1.75 billion in shares over the next three months, down from $2.75 billion in the previous three months.

The company reported a first-quarter underlying replacement cost profit of $4.96 billion, up from $4.8 billion in the fourth quarter of 2022 and exceeding analysts’ forecasts of $4.3 billion, according to a survey conducted by the company.

Even though lower oil and gas prices and refining margins contributed to the profit, BP noted that “an exceptional gas marketing and trading result, a lower level of refinery turnaround activity, and a very strong oil trading result” were the primary contributors.

Benchmark Brent crude oil prices in the first quarter of 2019 averaged $81 per barrel, down 16% from a year earlier and 7% from the previous quarter.

In the first quarter of 2022, BP reported a profit of $6.25 billion, setting the company on track to earn $28 billion for the full year.

While the $1.75 billion indicated on Tuesday still means the London-based company will exceed its goal of using 60% of surplus cash for the purpose, investors were nonetheless dissatisfied by the news.

Despite BP’s strong operational performance, analysts at Jefferies say the company is the first international oil major “to cut buybacks this quarter” due to the reduced share repurchase program.

After a 10% increase in February, the company maintained its dividend at 6.61 cents per share. In the wake of the epidemic, BP had already cut its dividend in half.
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BP forecasts stable oil and European gas prices for the second quarter, but lower diesel prices will reduce refinery profitability.

On a call with analysts, BP Chief Financial Officer Murray Auchincloss said that while fuel demand in Europe has been “a little bit” soft, consumption in China has been strong since the lifting of pandemic restrictions.

In addition, BP stated that it anticipates paying $1 billion between May 2022 and April 2023 to satisfy Britain’s windfall tax on the oil and gas sector.