Shares of BP rallied over 5% on Tuesday following the British oil giant’s announcement to bolster shareholder returns through increased buybacks and dividend hikes, despite a decline in its annual profit.
BP accelerated its share repurchases, revealing plans to execute a $1.75 billion buyback before reporting first-quarter results. Additionally, the company committed to a $3.5 billion share repurchase for the first half of the year.
Amidst this move, BP declared a dividend per ordinary share of 7.27 cents for the final quarter of 2023, marking a 10% surge compared to the same period in the previous year.
The oil titan reported an underlying replacement cost profit of $13.8 billion for 2023, a significant drop from the previous year’s record of $27.7 billion. Despite this, BP’s fourth-quarter net profit of nearly $3 billion surpassed analyst expectations.
Analysts at RBC Capital Markets hailed BP’s commitment to share buybacks beyond the first quarter of 2024 as a “welcome positive surprise.” They noted that BP’s plan to execute share buybacks of at least $14 billion through 2025, contingent on maintaining a strong investment grade rating, exceeded market expectations.
BP CEO Murray Auchincloss expressed confidence in the company’s strategy, emphasizing a commitment to delivering long-term value for shareholders. He cited strong operational performance in 2023 and reiterated BP’s focus on becoming a simpler, more focused, and higher-value company.
The positive response from investors comes amidst a challenging period for the energy industry. BP’s latest results follow British rival Shell’s announcement of stronger-than-anticipated full-year profits and a $3.5 billion share buyback program.
Despite pressure from activist investor Bluebell Capital Partners to ramp up oil and gas investments, BP has reaffirmed its commitment to sustainability. Under the leadership of Auchincloss, BP aims to address emissions reduction targets and navigate a rapidly evolving energy landscape.
As oil investors respond favorably to BP’s shareholder returns, the company’s strategic initiatives aim to navigate industry challenges while delivering value to shareholders in the years ahead.