BP underlined its multi-billion-dollar investor payout plans today, even as it pledged to cut costs and profits at the UK’s second-biggest energy major fell further than City experts expected.
The trading update from the £86 billion multinational re-ignited the controversy about bumper paydays from the energy sector after the cost-of-living crisis
BP’s key industry earnings measure, underlying replacement cost profit fell to $2.7 billion (£2.2 billion), from $2.9 billion in the fourth quarter and almost $5 billion in the same period a year ago. It was expected to be $2.9 billion, even for a period of generally lower oil and gas prices.
CEO Murray Auchincloss, who took up the top job permanently in January, called the numbers “resilient”, but pointed to cost-cutting plans ahead.
“We are simplifying and reducing complexity across BP and plan to deliver at least $2 billion of cash cost savings by the end of 2026”, he said.
Nonetheless, BP pledged to keep the pace of its share buy back at $1.75 billion for the quarter and repeated its commitment to return $3.5 billion in the first half of the year.
Capital return from major energy forms remains a hot topic after the record profits which followed the disruption in global markets which followed Vladimir Putin’s invasion of Ukraine and led to the cost of living crisis.
According to the campaign group Global Witness, BP has paid out £22.3 billion to investors since February 2022 in dividends and share buybacks.
Alice Harrison, head of fossil fuel campaigns at Global Witness, said: “BP is making the rich richer. And this will continue to be the case until we make the urgent switch to a clean energy system.”
The profit drop at BP came after the equivalent set of earnings from Shell, BP’s bigger London-listed rival, beat forecasts last week, helped by a perceived pivot back toward traditional fossil fuels under its CEO, Wael Sawan.
BP’s numbers played into a wider debate in the energy industry over the pace of the transition to low-carbon alternatives.
Russ Mould, investment director at AJ Bell, said: “Auchincloss is largely singing off the same hymn sheet as Sawan, when it comes to an energy transition strategy. Essentially, the company will make green investments as long as they pay.”
And in a reference to the bigger valuations on offer in New York for major companies which London-listed firms are struggling to match, Mould added:
“To an even greater extent than Shell’s Sawan, Auchincloss is eyeing a big valuation disparity between his charge and rivals across the Atlantic and will clearly feel a big part of his remit is closing that gap. To that end, the company is targeting efficiencies and savings through initiatives like the use of technology and improvements to its supply chain. Maintaining the pace on share buybacks demonstrates a commitment to returning cash to shareholders.”
