BP to resume share buybacks as Q1 profit soars on strong oil, gas trading

London

BP'S PROFIT more than tripled to US$2.6 billion in the first quarter thanks to stronger oil prices and bumper revenue from natural gas trading, paving the way for the energy company to start buying back its shares.

The jump in profit from a year earlier comes as BP says it expects oil demand to recover in 2021 due to strong growth in the United States and China as Covid-19 vaccination programmes accelerate.

In a sign of growing confidence in the economic recovery and its operations following a year of cutting costs, headcount and its dividend, BP said it will buy back US$500 million of shares in the second quarter to offset dilution from an employee share distribution programme.

Helping it deliver on its earlier promise to buy back shares, net debt fell below the company's US$35 billion target sooner than expected, dropping US$5.6 billion from the end of December to US$33.3 billion at the end of March, chiefly due to around US$4.8 billion worth of disposals and higher oil prices .

"We estimate a further US$1.5-2 billion in buybacks is possible this year," Bernstein analysts, who have an outperform rating on BP stock, said in a note.

BP said it would provide an update on the third quarter buyback programme later this year.

Chief executive Bernard Looney said it was possible that cash distribution, or dividend, levels could return to pre-pandemic levels over the course of next year.

As part of Mr Looney's plan to shift focus to low carbon investments, BP aims to sell US$25 billion of assets by 2025. From a target of 50 gigawatts of renewables capacity by 2030, it currently has 1.6 GW of installed capacity, has given the financial go-ahead to a further 3.3 GW and has an additional pipeline of around 14 GW. But out of its US$13 billion investment budget this year, BP has said it plans to spend US$9 billion on oil and gas.

First-quarter underlying replacement cost profit, the company's definition of net income, rose to US$2.6 billion, far exceeding forecasts of US$1.64 billion in a company-provided survey of analysts. That was also up from a US$110 million profit in the fourth quarter of 2020 and topped the pre-pandemic profit of US$2.4 billion posted in the first quarter of 2019. REUTERS

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