BP Signals Recovery for Oil Industry in Wake of Pandemic
April 06 2021 - 6:49AM
Dow Jones News
By Sarah McFarlane
LONDON -- Oil giant BP PLC said it had a solid start to the
year, aided by higher energy prices and strong results from its
trading division, giving the first indication that major oil
companies are on the road to recovery after pandemic-induced losses
across the industry last year.
The company said Tuesday it was on track to lower net debt to
$35 billion in the first quarter, a level it has said could trigger
share buybacks. BP previously said it expected to reach the target
between the fourth quarter of 2021 and the first quarter of
2022.
"This is a result of earlier than anticipated delivery of
disposal proceeds combined with very strong business performance
during the first quarter," said BP Chief Executive Bernard Looney.
The company, which didn't disclose revenue or profit figures ahead
of its results, said its performance was driven by trading, higher
oil prices and resilient operations.
Shares of BP rose 3% in morning trading in London.
BP said it received around $4.7 billion in disposal proceeds
during the first quarter of the year.
The company aims to sell $25 billion of assets between the
second half of 2020 and 2025 and is over half way to meeting the
goal with $14.7 billion sold.
One of the largest recent divestments was the sale of BP's
petrochemical business to British chemicals company Ineos Ltd. for
$5 billion in June. It got some of that money during the quarter,
as well as proceeds from the recent sale of an asset in Oman and
the sale of an interest in data-mining company Palantir
Technologies, Inc.
Oil companies suffered some of their worst results on record
last year, after Covid-19 lockdowns sapped demand, sending prices
lower. The industry slashed costs, reduced workforces and in some
cases, including BP, cut dividends.
However, BP said it plans to boost shareholder returns once it
has lowered its debt, committing to return at least 60% of surplus
cash as buybacks. The company said on Tuesday that it would update
the market on its share buyback plans when it reports its
first-quarter earnings on April 27.
"This is a positive announcement from BP signaling strong
performance in the first quarter of the year, the
earlier-than-expected start of cash returns to shareholders, while
at the same time providing evidence that it can deliver on its
various strategic initiatives," said Mark Nelson, analyst at Killik
& Co LLP.
BP is currently undertaking a strategic revamp intended to
reduce its dependence on oil, while increasing investments in
cleaner energy such as wind and solar power. Other big oil
companies including Royal Dutch Shell PLC are making similar moves
amid an expectation that the pandemic could accelerate a shift
toward lower-carbon energy.
Write to Sarah McFarlane at sarah.mcfarlane@wsj.com
(END) Dow Jones Newswires
April 06, 2021 06:34 ET (10:34 GMT)
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