Yahoo Finance BP expands share buybacks despite falling profits
BP (BP.L) has reported a sharp drop in profits after oil prices fell last year but is pushing ahead with further shareholder returns.
BP made underlying profits of $3bn (£2.4bn) in the final three months of the year, exceeding analyst estimates of $2.8bn, and taking earnings for 2023 to $13.8bn (£11bn). However, this is down by half from the record of $27.7bn set in 2022.
Despite the plunge, the energy firm will continue to pump money back to shareholders. It has announced a new $1.75bn share buyback — larger than the $1.5bn it executed in the last quarter — and is committed to $3.5bn worth of buybacks for the first half of this year. Overall, the plan is to buy back at least $14bn over 2024-25.
BP’s new chief executive Murray Auchincloss said: “Looking back, 2023 was a year of strong operational performance with real momentum in delivery right across the business.
“And as we look ahead, our destination remains unchanged... focused on growing the value of BP.”
Read more: The cheapest supermarket for fuel prices, revealed
Share buybacks are a way of returning cash to investors — it pushes up the share price, and means dividends can be higher as the pot is split between a smaller number of shares.
BP also hiked its dividend by year-on-year 10%to 7.27 cents a share in the fourth quarter.
The company is being criticised for expanding its share buybacks, with Global Witness claiming that the oil major’s shareholder payouts have increased by 43% compared to a five-year average — in 2023 totalling $12.7bn (£10.2bn).
It said the payout could cover the projected cost of natural disasters for the next seven years in the UK, six years in Australia, or four years in Germany.
Read more: FTSE 100 LIVE: European markets buoyant as BP stock surges
Joseph Evans, researcher at IPPR, asked if BP couldn’t find a better use for the money.
He said: “BP has decided to prioritise its shareholders over investing in the green transition. With profits down on last year, you might expect BP’s executives to be looking for profitable investments in the growing industries of the future, like renewable energy. Instead, they’ve chosen to enrich their investors.
“It’s clear that BP and other fossil-fuel giants can’t be trusted to drive the green transition.”
Shares in BP have jumped over 6% at the start of trading in London. They’re up 28p to 482p, a one-month high.
John Moore, senior investment manager at RBC Brewin Dolphin, said: “BP is still in resilient shape — surplus cashflow remains positive, net debt has fallen, and the management team’s optimism can be seen in the 10% increase in dividend distributions.”
“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.”
Watch: BP bolsters shareholder payouts as annual profits halve
Download the Yahoo Finance app, available for Apple and Android.
