(Feb 7): BP plc hiked its dividend and extended share buybacks after posting a record profit of US$27.65 billion for 2022, joining its fellow super majors by reaping the rewards of soaring oil and natural gas prices.
The cash gusher is delivering significant returns to investors — a 10% increase in the dividend and an extra US$2.75 billion of buybacks — while also highlighting a contradiction at the heart of Europe’s oil industry. As major producers talk increasingly about the need to cut emissions and switch to cleaner energy, their polluting fossil fuel business is becoming ever more lucrative as a result of Russia’s invasion of Ukraine.
BP pledged to accelerate investments in both low-carbon energy and fossil fuels. However, the company slowed down its plan to get out of oil and gas and will be less aggressive in curbing its carbon emissions.
By 2030, production of fossil fuels will be about 25% lower than it was in 2019, excluding the contribution from Russia’s Rosneft PJSC. That’s a big revision to its 2020 goal to cut output by 40% by the end of the decade.
Shares of the company rose 3.2% to 493.5 pence as of 8.01am in London.
“We are growing our investment into our transition and, at the same time, growing investment into today’s energy system.” chief executive officer Bernard Looney said in a statement on Tuesday. “It’s what governments and customers are asking of companies like us.”
BP said it would evenly split additional investment between low-carbon energy and oil and gas, spending up to US$8 billion more on each by 2030. Annual capital expenditure could be slightly higher than previously planned, ranging between US$14 billion and US$18 billion each year for the rest of the decade.
The company will target petroleum resources that can be developed quickly, offer a fast payback and overall better returns. Last month, in its Energy Outlook report, BP predicted that Russia’s invasion of Ukraine would accelerate the world’s transition away from fossil fuels as countries seek to boost energy security by generating more renewable energy at home.
BP pledged to deliver higher returns from both clean energy and fossil fuels. By increasing investment and revising oil and gas price assumptions higher, the company said it would grow earnings per share before interest, taxes, depreciation and amortisation by 12% a year through to 2025.
BP’s adjusted net income was US$4.81 billion in the fourth quarter, down from the record-setting levels reached earlier in the year and missing the average analyst estimate of US$5.11 billion.
The profit boom has been healthy for BP’s balance sheet, something that had been a source of investor concern in the years following the 2010 Deepwater Horizon oil spill. Net debt fell for the 11th successive quarter and was down by US$9.2 billion over 2022.