BP net profit slumps as gas prices drop

LONDON - British energy giant BP said yesterday net profit slumped 72% in the first quarter, as gas prices declined from a year earlier. Profit after tax tumbled to US$2.3 billion from US$8.2 billion in the first three months of 2023, BP said. Total revenue dropped 13% to US$48.9 billion.

Alongside the results, BP announced “at least” US$2.0 billion in cost-savings by the end of 2026. “We are simplifying and reducing complexity across BP,” chief executive Murray Auchincloss said in an earnings statement. Auchincloss, a veteran BP employee, became CEO in January following a period as interim boss in the wake of Bernard Looney’s sacking. Looney was dismissed over his failure to disclose past relationships with colleagues.

BP’s rival Shell said last week its net profit dropped 15% to US$7.4 billion in the first quarter. Gas prices have dropped heavily since soaring after the invasion of Ukraine by major energy producer Russia in early 2022.

BP also announced a dividend payment, and plans to buy back shares totalling US$1.75 billion, half the amount anticipated for the first six months of 2024.

“BP’s proving it can splash the cash to shareholders, even in a lower pricing environment,” noted Derren Nathan, head of equity research at Hargreaves Lansdown. “Commodity prices are out of BP’s control, but where it can make a difference it is… There’s a new plan to deliver cost-savings... and some of the effects of lower prices have been offset by increased production.”

BP said savings would come from various changes, including to digital operations and supply chains. It said that underlying replacement cost profit, its preferred measure, came in at US$2.7 billion in the first quarter, down from nearly US$5 billion a year earlier. That was below forecasts of nearly US$2.9 billion.

In early London trading, shares in the group dropped 0.6%, overturning a slight gain at the open.

“Unlike rival Shell, which last week managed to report earnings which were down year-on-year but still higher than analysts expected, BP’s quarterly scorecard disappointed investors,” said Victoria Scholar, head of investment at Interactive Investor. She noted that BP has also suffered from a firstquarter power outage at a major refinery in the United States.

“On top of that, compared to its US rivals, BP has put a much greater emphasis on the green energy transition, and unfortunately BP has suffered as a consequence.”

As is custom when energy majors posts earnings, environmentalists hit out. Alice Harrison, head of fossil fuel campaigns at Global Witness, criticised BP’s rewards to shareholders and its energy prices, which have remained high during the drawn-out cost-of-living crisis. BP was more interested in “making the rich richer” than helping to “ease the burden of high bills, or support countries suffering from the climate crisis”, she said.

Elsewhere in the energy sector yesterday, oil giant Saudi Aramco said its firstquarter net profit fell 14.5% to US$27.27 billion as the Gulf kingdom maintained production cuts.