BP has followed rival Shell in revealing a sharp fall in profits in 2023, reflecting a significant drop in oil and gas prices compared with the previous year.
The oil supermajor reported a $13.8billion (£11billion) underlying replacement cost profit for last year, compared to a record $27.7billion (£22.1billion) the previous year.
New boss Murray Auchincloss has opted to hold firm on BP’s green spending plans for now, but the group has lined-up fresh shareholder payouts in efforts to boost its share price and pacify disappointed investors.
Strong results: Oil supermajor BP reported a $13.8billion (£11billion) underlying replacement cost profit in 2023, compared to a record $27.7billion (£22.1billion) the previous year
BP’s 2023 profits were still far stronger than pre-pandemic levels, with net debt dipping by around $510million to $20.9billion and surplus cash flow totalling $7.9billion.
It also achieved a better-than-expected performance in the final three months of 2023, posting underlying profits of $3billion (£2.4billion) against analyst forecasts of $2.8billion (£2.2billion).
Following the result, the FTSE 100 firm has unveiled a $1.75billion share buyback and promised to return $3.5billion to shareholders during the first half of 2024.
In addition, BP declared a 10 per cent hike in its fourth-quarter dividend to 7.27 cents per share.
Chief executive Auchincloss, who replaced Bernard Looney at the beginning of the year, said: ‘Looking back, 2023 was a year of strong operational performance with real momentum in delivery right across the business.’
BP shares jumped 6 per cent to 481.25p on Tuesday morning, making them the FTSE 100’s best performer, although they have flatlined over the past 12 months, while Shell shares have risen by around 4 per cent.
Under previous boss Looney, BP rowed back on plans to cut oil and gas output amid concerns about energy security and affordability.
However, Auchincloss has recently doubled down on the oil giant’s green strategy despite vocal pressure from some investors as it continues to lag rival Shell.
The London-based group expects underlying oil and gas production to rise this year but gas and low-carbon energy output to decline.
And BP has held firm over capital expenditure for 2024 of approximately $16billion as it continues its transition plan. Capital expenditure is likely to stay at around $16bn a year until at least 2030.
John Moore, senior investment manager at RBC Brewin Dolphin, said: ‘Questions have been raised over its future direction and BP will need to strike a tricky balance of continuing to invest in its core energy business to deliver returns in the short term, while maintaining its long-term transformation.’
Susannah Streeter, head of money and markets, Hargreaves Lansdown, added: ‘The priorities of BP’s new CEO Murray Auchincloss have been made clear.
‘Although on appointment he pledged that BP’s strategy to transition from an international oil company to an integrated energy company was unchanged, the big share buy-back announcement shows the immediate focus is on boosting the share price and returning value to shareholders.’
Like BP, Shell announced a dividend uplift last week despite its annual profits also plunging due to tumbling petroleum and gas prices.
Britain’s largest oil business reported adjusted earnings decreased by 30 per cent – from a record £31.6billion in 2022 to £22.4billion last year, but these were still the two best results in the firm’s history.
