BP sees profit rise while share price drops

London — BP made a profit of $5bn in the first quarter of 2023, up from the previous three months on the back of stellar oil and gas trading, but the company’s shares fell as it slowed a share buyback programme.

BP’s results, which beat forecasts, follow a strong showing by rivals including ExxonMobil and Chevron last week as oil majors continue to benefit from energy prices that remain elevated despite some softening since the start of 2023.

BP’s shares, however, were about 5% lower by 11.47am GMT — compared with a drop of about 1.55% for an index of European oil companies — after it said it would repurchase $1.75bn worth of shares over the next three months, down from $2.75bn in the previous three.

The smaller target is a result of a big drop in operating cash flow to $7.6bn during the quarter, from $13.5bn in the final quarter of 2022.

BP will still exceeded its goal of using 60% of surplus cash to buy its own shares, but investors were disappointed.

The lower share buyback “will more than offset the good operational performance as BP is the first international oil company ... to cut buybacks this quarter,” Jefferies analysts said in a note.

The London-based company repurchased a total of $11.7bn worth of shares in 2022.

Exceptional trading 

First-quarter underlying replacement cost profit, BP’s definition of net income, reached $4.96bn, up from $4.8bn in the fourth quarter of 2022 and above expectations of $4.3bn in a company-provided survey of analysts.

The profit reflects “an exceptional gas marketing and trading result, a lower level of refinery turnaround activity and a very strong oil trading result”, BP said, noting the partial offset from lower oil and gas prices and refining margins.

Benchmark Brent crude oil prices averaged $81 a barrel in the first three months of 2023, down 16% from a year earlier and 7% from the fourth-quarter.

BP had reported a $6.25bn profit in the first quarter of 2022, on its way to a record $28bn year.

Its dividend remained unchanged at 6.61c a share after a 10% increase in February. BP had previously halved its payout in the wake of the pandemic.

Windfall tax 

BP said it expected oil and European gas prices to remain strong in the second quarter even as refining profit margins were expected to weaken due to lower diesel prices.

Fuel demand in Europe had been “a little bit” soft while consumption in China had been strong after the lifting of pandemic restrictions, BP CFO Murray Auchincloss said.

BP also said it expected to pay $1bn under Britain’s windfall tax on the oil and gas sector between May 2022 and April 2023.

Reuters