BP boosts buybacks despite costly Russia exit

BP recorded its biggest quarterly loss after writing down $24 billion to exit its Russia businesses but a strong operational performance on the back of rocketing oil and gas prices helped the British energy firm step up share buybacks.

BP shares were up 3.3% in early trading in London yesterday, outperforming the sector, after the company reported its strongest operational performance since 2008.

Soaring oil and gas prices in the wake of the Russian invasion of Ukraine on Feb 24 helped offset losses BP incurred from abruptly abandoning its shareholdings in Russia, including its 19.75% stake in oil giant Rosneft.

The non-cash writedown of its stakes in Rosneft and two other joint ventures pushed BP into a headline loss of $20.4 billion in the quarter, its biggest recorded. But the charge was slightly lower than BP’s initial estimates of $25 billion.

BP’s underlying replacement cost profit, the company’s definition of net earnings, reached $6.2 billion in the first quarter, the strongest since 2008 and far exceeding analysts’ expectations for a $4.49 billion profit.

The profit was driven by what it called an “exceptional” performance of BP’s oil and gas trading division, as well as higher oil and gas prices and strong refining margins. The company did not make any money from Rosneft in the quarter.

It compares with $4.1 billion in profit in the fourth quarter of 2021 and $2.63 billion a year earlier. Its 2021 profit was the highest in eight years.

BP, which also halted trading Russian oil, said the exit from Russia, which had contributed 3% of the company’s cash flow last year, would not affect its plan to shift away from oil and gas towards renewables.

“The exit has not changed our strategy, our financial frame, or our expectations for shareholder distributions,” chief executive officer Bernard Looney said.

Global refining margins soared in recent months as economies recovered from the Covid-19 pandemic and Russian oil started to vanish from Europe, which heavily relies on Russian refined products like diesel.

BP’s refined oil products unit made a profit of $1.6 billion in the first three months, compared with a loss of $26 million in the previous quarter and a $2 million loss a year ago.

The company said it would boost its quarterly share repurchases to $2.5 billion before the end of the second quarter after its surplus cash flow rose to more than $4 billion.

BP said in February it would accelerate its share buybacks to $1.5 billion per quarter from $1.25 billion.

BP previously said it would repurchase $4 billion a year at oil prices of $60 per barrel, well below the current price of benchmark Brent, which was about $107 yesterday.

The company maintained its dividend at 5.46 cents per share.