By Stephanie Kelly and Shadia Nasralla
LONDON, Feb 10 (Reuters) – BP suspended its share buyback programme and took about $4 billion of charges in its renewables and biogas assets ahead of a new CEO taking the helm, as the oil major reported quarterly profit that met expectations on Tuesday.
BP, whose new CEO Meg O’Neill will start in April, said it would shift money from buybacks to shrinking its debt and refocus investment in oil and gas projects where it expects better returns.
Berenberg analysts were not surprised by the removal of buybacks, but said the market took it as a negative, alongside BP dropping a pledge to pay out 30% to 40% of its operating cash flow in dividends and buybacks.
RBC and Barclays analysts said scrapping buybacks was the right move for the company, given its debt.
Shares sank about 4.2% in late morning trading, against a 0.5% dip in a broader index of European energy companies.
BP PAUSES BUYBACKS AS IT CUTS DEBT BURDEN
The oil major trimmed its net debt to $22 billion from $26 billion in the previous quarter, and reiterated a targeted amount of $14 billion-$18 billion by 2027.
Analysts had raised the prospect that European oil majors’ buyback programmes may shrink due to lower oil and gas prices. Norway’s Equinor slashed its buyback programme by 70% last week, though Shell and Exxon have held firm on their buybacks.
BP had repurchased shares worth $750 million over the last three months, and has bought back shares every three months since the second quarter of 2021, according to LSEG data.
The company’s fourth-quarter underlying replacement cost profit, or adjusted net income, was $1.54 billion, up 32% from a year earlier.
FOCUS RETURNS TO OIL AND GAS
A year ago, under then-CEO Murray Auchincloss, BP announced a strategy reset back to hydrocarbons, saying the move would improve profitability after an ill-fated foray into renewables by predecessor Bernard Looney.
In an update on the Brazilian Bumerangue discovery, its biggest hydrocarbon find in 25 years, BP estimated it holds 8 billion barrels of liquids in place, split between oil and condensate.
The company said it plans to drill appraisal wells around the end of the year. Citi analysts estimate around 25%-40% of the resources can be tapped.
WRITES DOWN LOW-CARBON PROJECTS
BP had previously flagged up to $5 billion in impairments and, on Tuesday, listed its solar unit Lightsource bp, U.S. biogas unit Archaea and offshore wind businesses as the main reasons. BP bought Archaea in 2022 for $4.1 billion.
“I really don’t like taking impairments. I’m very aware that this is our shareholders’ capital, but these are the accounting consequences of the discipline that we are putting into our company,” Finance Chief Kate Thomson told Reuters on a call. “We’ve tightened very hard the number of plants we’re moving forward.”
Thomson and interim CEO Carol Howle declined to give further details but said the impairments allow BP to invest in assets that promise the best returns.
(Reporting by Stephanie Kelly and Shadia Nasralla; Editing by Joe Bavier and Bernadette Baum)
