BP notches up bumper profits haul as oil prices rebound

The price of Brent crude has rebounded to an average of $61 a barrel in the first quarter, up from $50 a year ago and $44 in the fourth quarter of 2020. Image: Getty.
Holly Williams

BP will use a mammoth $3.3 billion (£2.4bn) profit to help win favour from investors, promising a major payout thanks to "significantly" higher oil prices.

It will buy back shares from investors for around $500 million (£360m) in the second quarter after managing to pay down net debt to below $35bn (£25bn) nearly a year earlier than expected.

Net debt stood at $33.3bn (£24bn) at the end of March, helped by a programme of asset sales and firmer oil prices.

The oil giant's $3.3bn (£2.4bn) replacement cost profits haul for the first three months of 2021 was better than expected and marks a bounce back from losses of $628m (£452m) a year earlier when the coronavirus crisis struck and sent the price of crude plummeting.

On an underlying basis, BP's replacement cost profits - the group's preferred measure - surged to $2.6bn (£1.9 billion) in the three months to March 31 from $791m (£569m) a year earlier and just $115m (£83m) in the previous quarter.

Most analysts had been expecting first-quarter underlying replacement cost profits to reach $1.64bn (£1.18bn).

BP said: "This result was driven by an exceptional gas marketing and trading performance, significantly higher oil prices and higher refining margins."

Chief executive Bernard Looney said: "This quarter demonstrates what we mean by performing while transforming.

"With the acceleration of divestment proceeds, together with strong business performance and the recovery in the price environment, we generated strong cash flow and delivered on our net debt target around a year early.

"We are commencing share buybacks in the second quarter which, alongside our resilient dividend, support the growth in distributions to shareholders."

BP announced a dividend of 5.25 cents (3.82p) a share for the first quarter, which is in line with the previous quarter's payout, but half that seen a year earlier.

Last year, it cut its dividend for the first time since the Gulf of Mexico oil spill in response to the pandemic, which sparked an oil price rout on fears over the global economy.

But oil prices have been recovering sharply as the world's biggest economies bounce back from the crisis.

The price of Brent crude has rebounded to an average of $61 a barrel in the first quarter, up from $50 a year ago and $44 in the fourth quarter of 2020.

BP's share price however has only regained some of the losses it made during the pandemic. Unlike many of its international peers, shares are still down around 40 per cent from pre-pandemic levels.

The company and many of its investors hope that soon it will be less affected by the fluctuations in the price of crude oil amid a shift to greener revenues.

On a call with analysts, Mr Looney and finance boss Murray Auchincloss spoke of how BP can compete to charge cars by investing in new fast chargers.

Speed will be key in future, with BP hoping to help drivers charge up in only five or six minutes - around the same time as it takes to fill up a petrol car today and enough for them to buy a bar of chocolate from the on-site shop.

"How do you differentiate an electron from an electron? You differentiate it by the experience, quite frankly. If you can charge your car to go 100 miles in 10 minutes, I think that's a differentiated experience," Mr Looney said.

"That's why we're focused very heavily on ultra-fast charging. If you have a digital solution, that is end-to-end, that is easy to use, that allows easy payment - that will differentiate you.

"If you have a loyalty mechanism, which we have, and we're growing, that will bring you back, that will differentiate you."

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