BP will begin its share buyback in Q2
BP’s (LON:BP) earnings climbed over the last quarter, as a result of significantly higher oil prices and bumper revenue from natural gas trading.
Profits rose to $3.3bn on a replacement cost (RC) basis, up from a loss of $628m in Q1 of 2020 when the pandemic began, and a profit of $825m in the final quarter of 2020.
On an underlying RC basis, Q1 profits more than tripled year-on-year, to $2.6bn.
The FTSE 100 oil giant also said it will begin its share buyback in Q2, after it hit its net reduction targets early following a ‘strong quarter’. This is in addition to its regular quarterly dividend payment of 5.25 cents per share.
BP shares reacted positively to the company’s Q1 results, rising by 3% in early trading, before retreating a bit.
BP also announced that strong cash flow in the quarter had allowed it to reach its debt reduction targets around a year early.
Commenting on the results, Steve Clayton, manager of the HL Select UK Income Shares fund, which has a position in BP said:
“The market could not have asked for more from BP with these results. 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 energy sector had a tough pandemic; oil prices crashed as travel ground to a halt around the globe. BP is now riding the recovery and reshaping the business for a low-carbon future. 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. In the meantime, investors can look to a dividend yield of 5%.”
