BP share price jumps as oil giant commits to buybacks

BP Share Price

The BP share price (LON:BP) jumped over the last couple of weeks, from 292p per share on 20 April to 312p today. The sharp rise came about as the FTSE 100 oil giant promised to buy back shares after it cut its debt faster than expected. Year-to-date the BP share price has added 21.7%.

BP Commits to Share Buybacks

In an effort to impress investors, BP stated its commitment to buying back shares this year as the company reduced its debt levels quicker than anticipated. The news came as BP announced on Tuesday that it expects to reach its $35bn net debt target in Q1 of 2021. The estimate is a result of earlier-than-expected proceeds from disposals and a “very strong quarter”, the oil company said last week. At the end of 2020, BP had a debt pile of $39bn. The company previously expected to reduce its debt to $35bn by as late as 2022.

“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,” said Bernard Looney, chief executive.

The company plans to begin buying back shares once it reaches its debt target, and will provide an additional update upon releasing its Q1 results on 27 April.

Clean Energy Transition

BP suffered over the past 12 months as the pandemic squeezed demand, while investors didn’t fully buy into its transition into a clean energy company. While its recent results were impressive, this still remains an issue for the company.

Mr Looney has said he is “encouraged” by the major’s direction and that he is “focused on the job at hand”.

“The last thing investors would want us to do is start changing our mind,” Mr Looney said, adding: “We’re a transitioning company. Our ambition is to become a net zero company but it won’t happen overnight.”

It could be years before we know whether or not BP is able to reinvent itself in a way which convinces shareholders.