BP shares rise 6% after UK oil giant announces share buyback

Elevated profits, sharrae buyback scheme lift BP share price

BP shares rallied by as much as 6% on Tuesday as the company announced an expansion of its share buyback program and a hike in its dividend payout, despite a drop in annual profit.

The company is stepping up its share buyback efforts, with plans to repurchase $1.75 billion worth of shares before releasing its first-quarter results. BP has also committed to a $3.5 billion buyback for the first half of the year.

The oil giant also raised its dividend to 7.27 cents per ordinary share for the last quarter of 2023, marking a 10% increase from the same quarter the previous year.

For the year 2023, BP reported an underlying replacement cost profit, which is considered a proxy for net profit, of $13.8 billion. Analysts had anticipated net profit of $13.9 billion for the full year 023, according to a consensus compiled by LSEG.

While BP's earnings in 2023 halved from the 2022 record of $27.7 billion, a year marked by surging fossil fuel prices that led to substantial profits industry-wide, they still represented the company's second-highest earnings since 2012.

In the fourth quarter alone, BP achieved a net profit of close to $3 billion, beating out the $2.6 billion predicted by analysts.

BP shares lead Euro Stoxx 600 on Tuesday

As BP shares led gains on the UK’s benchmark FTSE 100 index and pan-European Stoxx 600 index, analysts at RBC Capital Market said BP's extension of its share buyback program beyond the first quarter of 2024 was a "welcome positive surprise”.

They added that the company’s plan to execute share buybacks of at least $14 billion through 2025 — subject to preserving a strong investment grade rating — as a move that likely took the market by surprise.

In a note cited by CNBC, RBC Capital Markets wrote:

“With BP putting out 2025 specific EBITDA targets, which are also above consensus expectations, the commitment on the payout front shows confidence in future delivery, we think”.

EBITDA refers to earnings before interest, taxes, depreciation and amortization.

BP CEO points to “real momentum” in 2023

Commenting on the company’s results, BP CEO Murray Auchincloss said in a statement:

“Looking back, 2023 was a year of strong operational performance with real momentum in delivery right across the business. We are confident in our strategy, on delivering as a simpler, more focused and higher-value company, and committed to growing long-term value for our shareholders”.

BP reported that its fourth-quarter performance was buoyed by robust gas trading, although it was tempered by significantly reduced refining margins within the industry. The company's net debt was recorded at $20.9 billion at the end of 2023, showing a slight decrease from $21.4 billion at the end of 2022.

In related news, BP's British competitor Shell, unveiled stronger-than-expected profits for the full year last Thursday, leading to a 4% increase in its dividend and the start of a new $3.5 billion share buyback scheme.

Meanwhile, in the United States, both Exxon Mobil and Chevron outperformed quarterly earnings forecasts. However, their financial outcomes experienced a notable decline from the previous year, influenced by the downturn in fossil fuel prices.