BP quarterly profits drop 45% to $2.7 billion but share buybacks stay

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BP Plc maintained the pace of its share buybacks even as first-quarter profit and cash flow fell by more than expected and net-debt increased.  

The result marks the end of a mixed set of Big Oil earnings which saw Shell Plc, TotalEnergies SE and Chevron Corp. do better than expected, while Exxon Mobil Corp.’s profit fell short. All of the companies kept their focus on returning cash to shareholders, and BP pledged to repurchase $3.5 billion of shares in the first half of the year, matching the pace of prior quarters. 

Yet despite stronger earnings from oil and gas trading, BP reported weakness in some key financial underpinnings of those shareholder returns, even with Brent crude above $80 a barrel. 

Shares of the company rose 0.5% to 512.8 pence as of 8:13 a.m. in London. 

Operating cash flow was just over $5 billion, the lowest since the fourth-quarter of 2020 and well below the average analyst estimate of $6.72 billion. Net-debt rose by more than $3 billion to $24.02 billion at the end of the first quarter. BP said both of these figures were affected by a $2.39 billion build in working capital, most of which should be reversed by the end of the third quarter. 

The company made a new pledge to further reduce costs in the medium term, after announcing changes to its organizational structure. 

“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,” BP Chief Executive Officer Murray Auchincloss said in a statement on Tuesday. 

Adjusted net income for the first three months of the year was $2.72 billion, compared with $4.96 billion a year earlier and $2.99 billion in the prior quarter. That missed the average estimate of $2.91 billion.  

After adjusting for the change in working capital, BP’s cash flow was in line with expectations and the profit shortfall was mainly down to a higher-than-expected tax rate, RBC analyst Biraj Borkhataria said in a note. 

Profits from BP’s oil and gas trading businesses were “strong,” an improvement from the fourth quarter where the unit was described as having “weak” performance. The company, like the rest of its Big Oil peers, doesn’t break down exactly how much its trading divisions make, but has said that the whole organization has delivered a 4% uplift to return on average capital employed over the past four years. 

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