- Record annual profit, 10% dividend hike,$2.75bn buyback
- Net debt reduced for 11th consecutive quarter
- Oil prices supported by China recovery
Oil giant BP (BP) couldn’t have done more to please investors on Tuesday after clocking up record annual profits, increasing the dividend by 10% and starting a new $2.75 billion share buyback.
The shares topped the FTSE 100 leaderboard after rising 4% to 497.7p, taking the gains over the last year to 20%.
The company anticipates making further divestments in 2023 of between $2 billion to $3 billion and reiterated expectations of achieving $25 billion of divestments and other proceeds between the middle of 2020 and 2025.
WHAT DID BP REPORT?
For the year ended 31 December, BP generated underlying replacement cost profit of $27.65 billion, more than double the $12.8 billion generated in 2021.
Strong surplus cash flow enabled the company to reduce net debt for the 11th consecutive quarter while also making share repurchases. BP ended 2022 with net debt of $21.4 billion, down from $30.6 billion in 2021.
Based on BP’s current forecasts it anticipates spending $4 billion a year on share buybacks and has the capacity at the lower end of its capital expenditure range to increase the annual dividend by 4% a year.
Since the fourth quarter of 2021 BP has raised the dividend by 21% and announced $11.25 billion of share buybacks.
While it is commendable of the company to reward shareholders while also making necessary investments towards a greener future, the question of windfall taxes is ever present.
WHAT ARE THE EXPERTS SAYING?
Russ Mould, investment director at AJ Bell, commented: ‘Just as ExxonMobil’s results angered The White House, which called its high profits “outrageous”, news that BP has recorded record profits is also likely to make the UK public’s blood boil.
‘The situation is no different to last time. Oil and gas companies have benefited from the spike in energy prices as a direct result of Russia invading Ukraine which causes various countries to rethink the source of their supplies.
‘The big oil companies have made a load of money while consumers and businesses have suffered from their energy bills going through the roof. The nation says: ‘Does that seem fair?
‘Unfortunately, BP’s success makes it a target because other people have suffered at the same time it has enjoyed bolstered earnings - namely the public and businesses who’ve had to stomach higher energy bills. Therefore, BP cannot lay back and expect to see praise for its operational and financial performance.’
Disclaimer: Financial services company AJ Bell referenced in this article owns Shares magazine. The author of the article (Martin Gamble) and the editor of the article (James Crux) own shares in AJ Bell.
