BP PLC (LON:BP. shares moved higher in Tuesday’s early deals as its first quarter update left investors suitably impressed.
In London, the shares gained 4.12p or 1.39% to change hands at 300.6p.
The financial results and an operations update characterised by the company as “performing while transforming” showed a US$4.6bn profit which is a return to form in terms of year-on-year comparisons. However, it is marked against the worst phase of the oil price slump in the midst of 2020 Coronavirus (COVID-19) pandemic which saw a US$4.3bn loss.
Replacement cost profit – BP’s preferred profitability metric – was reported at US$3.32bn for the quarter, versus a US$628mln loss year-on-year and an improvement from US$825mln in the fourth quarter of 2020.
BP generated US$6.1bn of operating cash flow in the three months ended March 31, 2020. Some US$4.8bn was brought in through divestments.
The company highlighted it reached a key debt reduction milestone a year earlier than target, with net debt at US$33.3bn at the end of March, compared to US$51.4bn a year earlier.
It confirmed US$500mln of share buy-backs are slated for the second quarter.
Chief executive Bernard Looney said in a statement: “This quarter demonstrates what we mean by performing while transforming.
“With the acceleration of divestment proceeds, together with strong business performance and the recovery in the price environment, we generated strong cash flow and delivered on our net debt target around a year early.
“We are commencing share buybacks in the second quarter which, alongside our resilient dividend, support the growth in distributions to shareholders.”
Updating on the group’s energy transition strategy, Looney added: “We've delivered disciplined strategic progress right across BP - including building a high-quality offshore wind business, making great strides in our electrification agenda and setting ourselves up for further growth in the Gulf of Mexico.”
Broker says market can’t ask for more
Stockbroker Hargreaves Lansdowne reacted positively to the update.
“The market could not have asked for more from BP with these results,” said Steve Clayton, investment manager for the broker’s HL Select UK Income Shares fund (which holds BP shares).
Clayton added: “The company has seized the opportunity of a recovery in energy prices to pay down its debts, leaving it well set for the future when conditions might not be so favourable.
“Crucially, BP’s cost control has left it able to generate surplus cash at oil prices as low as $45, underpinning the group’s ability to pay dividends back to investors.”
“The scale of the task ahead is huge. BP cannot become a green energy business overnight. But with investments into wind power, hydrogen production and EV charging networks mounting up, the transition is underway. Divestments of some of BP’s existing oil and gas assets will speed the journey.
“The crucial question, as yet unanswered, is what returns will BP be able to achieve from its growing portfolio of green energy investments.”