BMirror Desk:
British energy giant BP reported a significant drop in profits on Tuesday, with net income falling 72% to $2.3 billion in the first quarter of 2024 compared to $8.2 billion in the same period last year. This decline is primarily attributed to a significant decrease in gas prices from the record highs experienced in early 2022 following Russia’s invasion of Ukraine.
The company’s overall revenue also dipped by 13%, reaching $48.9 billion during the quarter.
BP acknowledged these challenges and outlined a cost-saving plan aiming to achieve at least $2.0 billion in annual savings by 2026. “We are simplifying and reducing complexity across BP,” stated CEO Murray Auchincloss, who assumed the role in January after the previous CEO’s departure.
Despite the profit slump, BP prioritized shareholder returns by announcing dividend payments and a $1.75 billion share buyback program, although this represents half the amount initially anticipated for the first half of 2024. Analysts acknowledged this focus on shareholder rewards even in a lower-price environment.
BP’s efforts to mitigate the impact of lower gas prices included increased production. However, the company’s underlying replacement cost profit, a key performance metric, still fell to $2.7 billion from nearly $5 billion year-on-year, missing analyst expectations of $2.9 billion.
Investors reacted negatively to the news, with BP’s share price dropping slightly in early London trading. This stands in contrast to rival Shell, which reported lower but still above-analyst-expectation profits last week. Analysts attributed BP’s underperformance to factors like a first-quarter power outage at a major US refinery and a potentially greater emphasis compared to US rivals on the green energy transition, which may be hindering profits in the short term.
Environmental groups criticized BP’s shareholder-focused approach and high energy prices during the ongoing cost-of-living crisis. They argue that BP should prioritize reducing energy costs for consumers and supporting nations impacted by the climate crisis instead of “making the rich richer,” as stated by Alice Harrison of Global Witness.
