BP’s profits exceeded expectations despite lower energy prices as the company maintains green spending

BP follows rival Shell in revealing a sharp drop in profits in 2023, due to a significant drop in oil and gas prices.

The oil giant reported an underlying replacement profit of $13.8 billion (£11 billion) last year, compared to a record $27.7 billion (£22.1 billion) the year before.

New boss Murray Auchincloss has opted to stick with BP’s green spending plans for now, but the group has lined up new shareholder payouts in a bid to boost the share price and calm disappointed investors.

BP’s 2023 profits were still much stronger than pre-pandemic levels, while net debt fell by about $510 million to $20.9 billion and excess cash flow totaled $7.9 billion.

The company also delivered a better-than-expected performance in the final three months of 2023, with underlying profits of $3 billion (£2.4 billion), versus analyst forecasts of $2.8 billion (£2.2 billion) .

Following the result, the FTSE 100 company unveiled a $1.75 billion share buyback and pledged to return $3.5 billion to shareholders in the first half of 2024.

In addition, BP announced a 10 percent increase in its fourth-quarter dividend to 7.27 cents per share.

Chief executive Auchincloss, who replaced Bernard Looney at the start of this year, said: ‘Looking back, 2023 was a year of strong operational performance with real momentum in results across the business.’

BP shares rose 6 per cent to 481.25p on Tuesday morning, making them the blue chip’s best-performing index, although they have leveled off over the past 12 months, while Shell shares are up around 4 per cent.

Under former boss Looney, BP backtracked on plans to cut oil and gas production amid concerns about energy security and affordability.

However, Auchincloss has recently doubled down on the oil giant’s green strategy, despite vocal pressure from some investors, as the company continues to lag behind rival Shell.

The London-based group expects underlying oil and gas production to rise this year, but gas and low-carbon energy production to decline.

And BP has stood firm on 2024 capital spending of about $16 billion as it continues its transition plan. Capital expenditures are likely to remain around $16 billion per year until at least 2030.

John Moore, senior investment manager at RBC Brewin Dolphin, said: ‘Questions have been raised about its future direction and BP will have to strike a tricky balance between continuing to invest in its nuclear power business to deliver short-term returns, while driving long-term transformation. ‘

Susannah Streeter, head of money and markets at Hargreaves Lansdown, added: ‘The priorities of BP’s new chief executive Murray Auchincloss have been made clear.

‘While he promised upon his appointment that BP’s strategy to transition from an international oil company to an integrated energy company would remain unchanged, the major share buyback announcement shows the immediate focus is on boosting the share price and returning value to shareholders.”

Like BP, Shell announced a dividend increase last week, despite annual profits also falling due to falling oil and gas prices.

Britain’s biggest oil company reported adjusted profits fell 30 percent – from a record £31.6 billion in 2022 to £22.4 billion last year, but these were still the two best results in history from the company.