Windfall for BP investors as higher oil prices send profits soaring

BP has pulled out all the stops to win over investors with a share buyback scheme as higher oil prices sent profits soaring.

The energy giant will hand back £360million to shareholders during the second quarter after it met a target to slash debts almost a year early.

It also had cash to spare after profits smashed the City’s expectations. The FTSE 100 company made £1.9billion in the first quarter of 2021 – far higher than analysts’ estimates of £1.2billion.

Soaring profits: BP will hand back £360m to shareholders during the second quarter after it met a target to slash debts almost a year early

It said this was due to strong gas trading, a better performance in its refining arm and higher oil prices, which are up from $51 a barrel at the start of January to $66 now.

Chief executive Bernard Looney said BP was ‘getting in a groove’ as the global economy begins tentatively to recover from the pandemic.

Shares fell 0.4 per cent, or 1.25p, to 295.3p as it pledged to return at least 60 per cent of any surplus cash it racks up via buybacks. 

Getting in a groove: BP boss Bernard Looney

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It has started the programme after it met a goal to trim its debt to £25billion after receiving money from a flurry of deals, including the sale of its petrochemicals business to Sir Jim Ratcliffe’s Ineos.

Investors will have to wait longer for BP to fully restore its prized dividend.

It chopped its payout in half to around 4p per share last August, cutting the amount it hands to shareholders each quarter from £1.7billion to £850million, in a move that weighed heavily on savers and pensioners. It has not said when dividends will increase again.

BP racked up a £13billion loss last year after crude prices fell as low as $19 a barrel when lockdowns brought industry and travel to a halt. 

It was one of the largest-ever corporate losses and the first time BP had been in the red since the Deepwater Horizon oil spill a decade ago.

That prompted a restructuring that included selling businesses and laying off 10,000 staff. 

The company and the wider industry believe it will take years for demand for oil to recover to 2019 levels.

Looney wants BP to become one of the world’s largest renewable energy companies and become carbon neutral by 2050, and launched the plans to do this shortly after he took over in February last year.

Many investors had been sceptical of whether the green drive would be possible as BP recovers from Covid.

Looney said: ‘With the start of the buybacks we have shown, I hope, that it doesn’t need to be a choice. We can develop competitive cash returns for our investors and at the same time invest to transition to a low-carbon future.’