BP boosts buybacks on soaring energy prices after costly Russia exit

Company quarterly net profit reaches $6.25bn.
Image: Bloomberg

BP recorded its biggest quarterly loss after writing down $24 billion to exit its Russia businesses but a strong operational performance on the back of rocketing oil and gas prices helped the British energy firm step up share buybacks.

BP shares were up 2.5% by 0925 GMT in London trading, outperforming rivals, after the company reported its strongest operational performance since 2008.

Soaring oil and gas prices in the wake of the Russian invasion of Ukraine on February 24 helped offset losses BP incurred from abruptly abandoning its shareholdings in Russia, including its 19.75% stake in oil giant Rosneft.

The non-cash writedown of its stakes in Rosneft and two other joint ventures pushed BP into a headline loss of $20.4 billion in the quarter, its biggest recorded. But the charge was slightly lower than BP’s initial estimates of $25 billion.

BP’s underlying replacement cost profit, the company’s definition of net earnings, reached $6.2 billion in the first quarter, the strongest since 2008 and far exceeding analysts’ expectations for a $4.49 billion profit. The 2022 first quarter performance was driven by what BP said was an “exceptional” performance in its oil and gas trading division. Chief financial officer Murray Auchincloss said volatility in oil and gas prices was most company had seen.

BP, whose shares up 7% since February, did not make any money from Rosneft in the quarter.

The company, which also halted trading Russian oil, said the exit from Russia, which had contributed 3% of the company’s cash flow last year, would not affect its plan to shift away from oil and gas towards renewables.

The exit “has not changed our strategy, our financial frame, or our expectations for shareholder distributions,” chief executive Bernard Looney said.

Global refining margins soared in recent months as economies recovered from the Covid-19 pandemic and Russian oil started to vanish from Europe, which heavily relies on Russian refined products like diesel.

BP’s refined oil products unit made a profit of $1.6 billion in the first three months, compared with a loss of $26 million in the previous quarter and a $2 million loss a year ago.

Buyback boost

BP rivals including Exxon Mobil, Chevron and TotalEnergies all saw a sharp rise in revenue in the quarter, also lifted by strong performances of their trading divisions, allowing them to boost shareholder returns. BP said it would increase its quarterly share repurchases to $2.5 billion before the end of the second quarter after its surplus cash flow rose to more than $4 billion.

BP said in February it would accelerate its share buybacks to $1.5 billion per quarter from $1.25 billion.

BP previously said it would repurchase $4 billion a year at oil prices of $60 per barrel, well below the current price of benchmark Brent LCOc1, which was about $107 on Tuesday.

The company maintained its dividend at 5.46 cents per share.

BP’s net debt declined sharply to $27.5 billion from $30.6 billion at the end of 2021.

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