BP swings to its highest annual profit in eight years

BP has posted profits of almost $13bn, its highest in eight years, driven by growing demand and surging prices for oil and natural gas.

The oil major said that underlying profits hit $12.8bn last year on a replacement cost basis, which is the measure most closely tracked by analysts. That was the highest level since 2013.

It also maintained its dividend and committed to buying back $1.5bn of shares in the first quarter of 2022.

Earnings for the last three months of 2021 rose to $4.1bn from $3.3bn in the third quarter, beating average analysts’ estimates of $3.9bn. That compares with $100mn in the final three months of 2020.

The profits marked an improved performance from 2020 when BP recorded a $5.7bn loss — its first annual loss in a decade — after coronavirus restrictions hit oil demand and it wrote down the value of billions of dollars’ worth of assets.

The group’s share price fell to a 25-year low in September 2020, days after chief executive Bernard Looney presented investors with his strategy to overhaul the company by increasing low-carbon investment, while cutting oil and gas production 40 per cent by 2030.

“Over the past two years we have set a new purpose, direction and strategy for BP, and completed the largest reorganisation in our history,” he said. “With this period of change fully behind us, we are now solely focused on driving value through the safe, efficient delivery of our strategy.”

Net debt declined for the seventh quarter in a row to $30.6bn, down from $32bn three months earlier. It was at $38.9bn at the end of 2020.

Shares in BP have risen 24 per cent this year. The British company, like its peers, has benefited from a global energy crunch that has pushed oil prices above $90 for the first time in more than seven years and sent gas prices to record highs.

Rival Shell last week reported earnings of $19.3bn for 2021, driven by bumper profits from its integrated gas business. US competitors ExxonMobil and Chevron have also been boosted by higher prices. They recorded net profits in 2021 of $23bn and $15.6bn respectively, the highest since 2014, when crude last traded above $100 a barrel.

BP’s profits were supported by its oil and gas business, where high crude production in particular and strong refining margins supported earnings, it said.

Biraj Borkhataria, an analyst at RBC Capital Markets, said it was “a decent set of underlying results” driven by oil production and operations. He added that more detail was needed on the expected performance of its low-carbon businesses.

BP is in the middle of one of the biggest corporate overhauls in the sector. It is aiming to build, buy or receive approval for 25GW of renewable power by 2025 and 50GW by 2030.

BP said it was confident in delivering the 2025 targets, having quadrupled its renewables development pipeline since 2019 from 6GW to 24.5GW. Annual capital expenditure on low carbon energy projects was expected to increase to $3-5bn a year by 2025 and $4-6bn by 2030, it said.