Tuesday, February 06, 2024

BP to scale up oil production amid shift away from renewables

Jonathan Leake
Tue, 6 February 2024

BP

BP has vowed to ramp up oil production in 2024 as the energy giant shifts away from ambitious net zero targets.

New chief executive Murray Auchincloss said BP will take a “pragmatic” approach to the green energy transition, as it scales back plans to reduce carbon emissions.

BP’s latest results revealed that profits fell from $27.7bn to $13.8bn in 2023, although shares rose by 5pc after the figures beat analyst estimates.


As part of Tuesday’s update, BP announced an accelerated share buyback programme as Mr Auchincloss tries to win over shareholders.

It comes after BP was targeted by activist investor Bluebell Capital last month, which called for the business to scrap “irrational” net zero commitments championed by former chief Bernard Looney.

The company’s latest annual report shows that its commitment to oil remains as strong as ever, with production surging by 8.6pc in the last quarter of 2023 to 1.4 million barrels of oil equivalent per day.

The same trend was evident throughout the year with oil production 6.7pc higher than in 2022.

However, BP now expects production levels to increase further: “Looking ahead, BP expects first quarter 2024 reported upstream production to be higher compared to fourth-quarter 2023.”

The predicted increase is linked to the startup of production in two fields located in the North Sea.

Multiple drilling projects are also underway in the Gulf of Mexico – a sensitive area for BP following the Deepwater Horizon disaster of 2010 when 11 people died in an explosion.

Last year the company paid out another $1.2bn in oil spill payments.

Despite the ramp up in oil production, BP said its renewables and low-carbon businesses were also expanding.

It said: “The renewables pipeline increased by 21.1 gigawatts during the full year, including BP being awarded the rights to develop two North Sea offshore wind projects in Germany (4GW) and an increase in dedicated hydrogen renewables (12.4GW).”

The fall in BP’s profits follows last week’s results from rival Shell, as profits hit $28.2bn, down from $39.9bn in 2022.

The annual results mark the end of a turbulent year for BP.

Mr Looney was forced out last September after it emerged that he had conducted multiple relationships with colleagues, of which he had not been “fully transparent” despite requests from BP’s board of directors.

BP’s board said Mr Looney had committed “serious misconduct” which resulted in him forfeiting up to £32.4m in bonuses.

Mr Auchincloss was initially appointed interim chief executive but was confirmed as the permanent successor last month.

Murray Auchincloss was initially appointed interim chief executive of BP after Bernard Looney's departure - Ryan Lim/AFP

His former post as BP’s chief financial officer has since been filled by Kate Thomson, formerly chief finance officer for BP’s production & operations business.

Analysts responded positively to the latest results.

Jamie Maddock, energy analyst at Quilter Cheviot, said BP had “beaten expectations”.

He said: “That share buyback scheme has potential to grow, reaching at least $14bn through to 2025, which would imply an impressive distribution yield and a strong show of confidence in the outlook.

“BP recognises that it has work to do with shareholders given what has happened over the last 12 months, and this is a positive start to the resetting of that relationship.”

However, BP’s bid to boost oil production was met with criticism by climate campaigners.

Charlie Kronick, senior climate advisor at Greenpeace UK said: “The reality is the company is still making billions of pounds from fossil fuels and its green policies fall far short of what’s needed to avoid the worst impacts of climate change.

“We simply cannot leave the future of the planet in the hands of executives and shareholders concerned only with cashing in on fossil fuels until the band stops playing.

“We urgently need the government to force companies like BP to stop drilling and to make their vast resources available both for the coming transition to low carbon energy.”

BP bags bumper 2023 profits, rewards investors

Roland JACKSON
Tue, 6 February 2024 


British energy giant BP logged multi-billion-dollar annual profits Tuesday despite lower oil prices and following boardroom turmoil, sending its share price rallying thanks also to more big payouts to investors.

Net profit came in at $15.2 billion in 2023, following a loss the prior year linked to its exit from Russia following Moscow's invasion of Ukraine, it said in a results statement.

The annual results sparked fresh fury from the green lobby but herald a new era under new chief executive Murray Auchincloss, following the dramatic sacking of his predecessor Bernard Looney.

The oil giant suffered a net loss of $2.5 billion in 2022, when it booked a gigantic charge of $24 billion on its exit from Russian energy group Rosneft.

Reflecting lower oil prices and refining margins last year, BP revealed Tuesday that underlying profit excluding exceptional items halved to $13.8 billion.

That compared with a record $27.7 billion the prior year when prices of fossil fuels had surged on key gas and oil producer Russia's assault on neighbouring Ukraine, boosting the performance of the global energy sector.

Shares rallied six percent to top London's FTSE 100 risers board after BP also announced forecast-beating fourth quarter profit, vast stock buybacks and a shareholder dividend hike.

BP will deliver $1.75 billion in buybacks for the fourth quarter of last year.

It also revealed $3.5 billion for the first half of this year under plans to buy back at least $14 billion over 2024-2025.

- 'Resilient performance' -


"BP joins the throng of the other global oil majors in capping off a difficult year with a resilient performance which beat expectations on most metrics," said Richard Hunter, head of markets at Interactive Investor.

The global industry was also energised in 2022 by rebounding demand and prices, as the world economy emerged from Covid pandemic lockdowns the prior year.

Prices have since declined but remain elevated due to concerns that the Israel-Hamas conflict could spark broader unrest in the crude-rich Middle East.

"Looking back, 2023 was a year of strong operational performance with real momentum in delivery right across the business," Auchincloss said in the earnings release.

BP's former chief financial officer took the reins in September, after Looney resigned and was later officially sacked over his failure to disclose past relationships with colleagues.

Activist investor Bluebell Capital last week urged BP to scale back its "irrational" clean energy ambitions to "invest in clean energy" like biofuels and hydrogen, rather than areas like renewable energy where the investment fund claims the group has no competitive advantage or experience.

- 'Destination unchanged' -

However, BP stressed on Tuesday that it remains committed to its energy transition strategy.

"As we look ahead, our destination remains unchanged -- from international oil company to integrated energy company -- focused on growing the value of BP," added Auchincloss.

BP had diluted its long-term carbon emission reduction targets one year ago for its oil and gas production.

Environmental campaigners Greenpeace on Tuesday slammed it for "falling far short" in tackling climate change.

"The company is still making billions from fossil fuels and its green policies fall far short of what's needed to avoid the worst impacts of climate change," said Charlie Kronick, senior climate advisor at Greenpeace UK.

"We simply cannot leave the future of the planet in the hands of executives and shareholders concerned only with cashing in on fossil fuels until the band stops playing."

UK rival Shell revealed last week that annual net profit more than halved in 2023 on lower oil and gas prices, but it returned $3.5 billion to shareholders and hiked its dividend.

US rivals Chevron and ExxonMobil also posted lower but still strong profits, and pushed ahead with hefty shareholder payouts.

ode-rfj/bcp/lth

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