BP profits halve in Q1 amid strategy reset, slump in crude prices
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The news: BP missed expectations in its first quarter, bringing in weaker profits after abandoning its strategy to become a leader in green energy earlier this year.
The numbers: BP posted underlying replacement cost profit, used as a proxy for net profit, of USD1.38 billion ($2.25 billion), falling short of the USD1.53 billion forecast by LSEG analysts. The figure also marks a sharp decline from the USD2.7 billion posted in the same period last year. BP said that a weakness in gas marketing and trading was to blame for the company’s 49% year-on-year fall in profit.
The oil major also bought back just USD750 million in shares in the first quarter, almost USD1 billion lower than the quarter prior.
Shares in BP were down 3.8% in early trading on Tuesday, and have dropped over 13.5% YTD.
The context: The FTSE 100 company also announced the resignation of its head of strategy, Giulia Chierchia, on Tuesday, who had helmed the oil major’s strategy to become a leader in green energy. The company announced in February that it would not be pursuing the strategy, pivoting its focus back to oil.
Activist investor Elliott Management went public with its 5% stake in BP last week, which had first been reported in February, making the fund the second-largest shareholder after BlackRock. While BP has been struggling to perform at pace with peers including Shell, Exxon and Chevron, CEO Murray Auchincloss said he is “confident” in BP’s restructuring plans to strengthen the balance sheet, reduce costs, and improve cash flow and returns, Elliott will likely continue ratcheting up pressure for results.
Auchincloss did not speculate on whether the company is a takeover target, and confirmed that BP has not asked the UK government for financial assistance.
“What I will say is we’re a strong, independent company and we’ve got sector-leading growth. And if we can deliver the sector-leading growth, and the first quarter is a fantastic example of that, then I have no concerns. I think we’re going to do great,” Auchincloss said.
The sources: BP results, CNBC, FT
