BP beat earnings expectations for the fourth quarter of 2023 and announced a $14 billion share buyback program, sending its stock price higher. The company’s underlying replacement cost profit, used as a proxy for net profit, came in at $4.8 billion, exceeding analysts’ forecasts of $4.6 billion.
Key Q4 Financial Results
- Underlying RC profit: $4.8 billion (forecast was $4.6 billion)
- Total quarterly profit: $3 billion
- Total 2023 profit: $15.2 billion, down from over $28 billion in 2022
- Revenue: $69.3 billion, down from 2022
- Announced new $14 billion share buyback program through 2025
BP benefited from strong refining margins and liquefied natural gas (LNG) trading, offsetting weaker oil and gas prices compared to 2022. CEO Bernard Looney said it was a “very strong set of results.”
Analysis and Background
BP has rebounded under new CEO Looney after posting losses in 2020 during the depths of the pandemic. He has focused on transitioning BP away from oil and gas towards areas like renewable energy and EVs. But BP still relies heavily on fossil fuels for profits – this quarter showed the importance of that legacy business.
| Financial Metric | Q4 2022 | Q4 2023 |
|---|---|---|
| Underlying RC profit | $4.8 billion | $3.7 billion |
| Total profit | $16.2 billion | $3 billion |
| Revenue | $72.2 billion | $69.3 billion |
While profits fell from 2022’s massive levels with lower oil prices, BP did beat expectations this quarter. The big headline was BP announcing further shareholder returns via buybacks, accelerating repurchases to $14 billion by 2025.
This comes after BP paid down debt faster than expected – reaching its $25 billion net debt target in 2022. With a strong balance sheet, returning more cash to shareholders has become a greater priority.
Outlook
The share buyback announcement led to BP’s stock jumping over 5% and reaching its highest level in a year. Investors cheered the increased distributions after dividends and buybacks lagged rivals like Shell in 2022.
Meanwhile, BP remains focused on the energy transition, expecting to invest up to $8 billion annually by 2030 into areas like renewables, mobility and EV charging. But BP will face challenges sustaining profits if oil and gas prices stay moderate.
Going forward, the market will watch whether BP can maintain shareholder returns via buybacks while still investing sufficiently for the future. But this quarter’s strong earnings and emphasis on rewards for investors sparked optimism for BP’s outlook.
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