BP Promises Another $1.5 Billion Buyback as Profit Soars

(Bloomberg) —

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BP Plc boosted share buybacks after surging oil and gas prices lifted profit to the highest in almost a decade.

The London-based company followed its Big Oil peers Exxon Mobil Corp., Chevron Corp. and Shell Plc, all of which are pouring money back to investors after years of paltry returns. BP will repurchase another $1.5 billion of shares using surplus 2021 cash flow before it announces first-quarter results later this year.

“At around $60 oil, we have the capacity for around $4 billion per annum of share buybacks,” Chief Executive Officer Bernard Looney said in an interview with Bloomberg TV on Tuesday. “So clearly if prices are higher, there is the opportunity for increased buybacks.”

BP’s earnings statement implies total repurchases of $6 billion for the year, Redburn analysts wrote in a note. That’s above previous expectations of $5 billion but “not as aggressive an increase as seen at Shell last week.”

Shares of the company rose 1.7% to 415.5 pence at 8:19 a.m. in London, for an increase of almost 60% over the past year.

Adjusted net income was $4.07 billion for the period, up from $115 million a year earlier and beating the average analyst estimate of $3.87 billion. Operating cash flow was $6.12 billion, compared with $2.27 billion a year earlier.

The return on average capital employed, a measure of how well the company is investing its shareholders’ money, surged to 13.3% in 2021, beating Shell’s fourth-quarter figure of 8.8%.

BP’s sprawling and secretive trading business appears not to have benefited from the price volatility seen in the fourth quarter, in contrast to rival Shell. The company reported “a significantly lower oil trading result and an average contribution from gas marketing and trading and the impact of higher energy costs.”

The results show how far BP has come since the start of the pandemic, having paid off more than $8 billion of net debt over the past year and also increased its dividend. The company also pledged to moderately increase investments, albeit from a historically low level.

Capital expenditure will be between $14 billion and $15 billion this year, up from $12.8 billion in 2021, and remain around that range until 2025. By then, BP plans to devote more than 40% of its investments into energy-transition businesses. The company also said it could achieve net-zero emissions sooner than its 2050 target.

“The past two years have reinforced our belief in the opportunities that the energy transition presents,” Looney said in a statement.

(Updates with CEO comment in third paragraph.)