ii view: BP renews focus on shareholder returns under new CEO

Full-year results to 31 December

• Underlying replacement cost profit down 50% year-over-year to $13.8 billion (£10.9 billion)
• Fourth quarter dividend up 10% to 7.27 US cents per share
• Total 2023 dividend of 28 US cents per share, up from 24 cents in 2022
• Total 2023 share buybacks of $7.9 billion 
• Net debt down 2% year-over-year to $20.9 billion

Guidance:

• Planning share buybacks of $3.5 during the first half of 2024
• Planning share buybacks of at least $14 billion in 2025 under current market conditions

Chief executive Murray Auchincloss said:

“Looking back, 2023 was a year of strong operational performance with real momentum in delivery right across the business. And as we look ahead, our destination remains unchanged – from IOC to IEC – focused on growing the value of bp. 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.”

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ii round-up:

Founded in 1908, oil major BP (LSE:BP.) today operates across four arenas. 

Oil production and operations account for its core hydrocarbon operations. Gas and low carbon energy combine its natural gas capabilities with low and zero carbon production. 

Customer and products bring together its Castrol lubricants, aviation fuelling, and retail forecourt or ‎convenience sites, with other businesses including its engineering and safety assurance authorities. 

For a round-up of these latest results announced on 6 February, please click here.

ii view:

Oil major BP employs over 60,000 people in more than 60 countries. Its operations include over 20,000 forecourt garages and more than 21,000 electric vehicle charging points, along with a pending renewables energy generation pipeline of 58.3 gigawatts. Competing against rivals such as Shell (LSE:SHEL) and TotalEnergies SE (EURONEXT:TTE), its gas and low carbon energy business generated its biggest slug of profits in 2023 at almost a half, followed by oil production and operations at close to two-fifths, and customer and products the balance at around a tenth. Other businesses or support functions made a small loss. 

For investors, the uncertain economic outlook, including growth concerns for China, now overshadow potential energy demand and usage. Costs generally for businesses remain elevated, energy prices have in recent years proven highly volatile, swinging between lows under the pandemic to highs following the Ukraine war, while global warming and climate change concerns remain. 

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On the upside, energy majors have become accustomed to dealing with energy price volatility. A diversity of operations exists ranging from hydrocarbon production to windfarm and solar and battery storage assets. Strong cashflow generation has helped reduce net debt to its lowest in a decade, while the new CEO is looking to return 80% of surplus cash via share buybacks, up from 60% previously.

In all, continued energy price volatility remains highly likely. However, with BP’s push towards a balance of fossil and renewable energy ongoing, a forecast dividend yield of around 5% plus consensus analyst fair value estimate of 600p per share, grounds for longer-term optimism look to persist. 

Positives: 

• Pursuing an Integrated Energy Company strategy 
• Focus on shareholder returns

Negatives:

• Climate change concerns  
• Uncertain economic outlook

The average rating of stock market analysts:

Buy