BP Expands Buybacks After ‘Exceptional’ Trading Performance

(Bloomberg) -- BP Plc boosted its share buybacks by $2.5 billion as cash flow surged, offsetting some of the discomfort caused by a $25.5 billion charge linked to its planned exit from Russia.

The company comfortably surpassed analysts' expectations after an “exceptional” first quarter for its oil and gas trading business. Other commodities traders from Bunge Ltd. to Glencore Plc have also posted stronger profits, aided by the unprecedented volatility caused by the war.

Shares of BP rose 1.9% to 393.8 pence as of 8:04 a.m. in London.

“In a quarter dominated by the tragic events in Ukraine and volatility in energy markets, BP's focus has been on supplying the reliable energy our customers need,” Chief Executive Officer Bernard Looney said in a statement on Tuesday. “Our decision in February to exit our shareholding in Rosneft resulted in the material non-cash charges.”

The company followed its peers Exxon Mobil Corp., Chevron Corp. and TotalEnergies SE, all of which saw their first-quarter net income -- excluding Russia-related writedowns -- soar in tandem with oil and gas prices after the invasion of Ukraine.

BP will expand its share buyback by $2.5 billion, following through on a pledge to return a portion of surplus cash flow to investors. The company repurchased $1.6 billion in the first quarter. That figure could grow further this year as oil and gas prices are forecast to remain above $100.

“Our bullish commodity price deck suggests the company is likely to generate significant free cash flow in the coming years,” RBC analyst Biraj Borkhataria said in a note. “We believe investors could receive more than 50% of the company's market cap back over the next five years.”

BP's first-quarter adjusted net income was $6.25 billion, more than double the amount from a year earlier and surpassing analyst expectations of $4.43 billion. The figure doesn't include an accounting loss of $29.29 billion, which is largely due to BP's decision to dump its stake of about 20% in Kremlin-controlled oil giant Rosneft PJSC.

The impact of the writedown on BP's total equity led to a slight increase in gearing to 25.9%, even as net debt fell to $27.46 billion.

BP remained tight-lipped about its strong trading performance. “We don't disclose the numbers” for the division, Looney said in an interview with Bloomberg TV, while noting the “incredible volatility” in the quarter. The unit that refines and trades oil products posted an almost fivefold increase in earnings before interest, taxes, depreciation and amortization to $2.03 billion.

London-based BP emphasized its commitment to help the U.K. boost its energy security, pledging investments of £18 billion ($23 billion) by the end of 2030, including North Sea oil and gas and also low-carbon sources. BP nevertheless stuck to its strict annual capital expenditure budget of $14 billion to $15 billion, and spent $2.9 billion in the first quarter.