BP reports 40% drop in Q1 earnings, trailing behind industry peers amid low energy prices

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on May 7, 2024
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  • BP's latest financial results mark it as the last of the leading Western oil giants to disclose its earnings.
  • In contrast, Shell posted a robust net profit of $7.7 billion last week.
  • BP's cash flow decreased by 34% to $5 billion after restocking diesel and gasoline stocks ahead of the summer.

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BP has reported a significant 40% drop in its first-quarter earnings, with profits falling to $2.7 billion, underperforming against analysts’ expectations due to lower energy prices and operational setbacks, including a U.S. refinery outage.

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Lagging behind amid industry challenges

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BP’s latest financial results mark it as the last of the leading Western oil giants to disclose its earnings for the first quarter.

In contrast, Shell posted a robust net profit of $7.7 billion last week, benefiting from disruptions to Red Sea shipping and Russian refining that boosted oil trading activities.

Meanwhile, other industry counterparts like Exxon Mobil, Chevron, and TotalEnergies reported declines in their profits, largely due to a sharp downturn in natural gas prices, reflecting broader market volatility.

Dividend stability amidst financial strain

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Despite the downturn, the London-based oil giant has maintained its dividend at 7.27 cents per share and continued its share buyback program at $1.75 billion for the next three months.

However, the company’s profit fell 5% short of analyst forecasts, complicating efforts by CEO Murray Auchincloss to stabilize the company following the abrupt resignation of his predecessor, Bernard Looney, in September.

Strategic shifts and cost-cutting measures

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Auchincloss, who previously served as head of finances under Looney, has pledged to streamline BP’s operations and reduce costs amid growing investor skepticism about the company’s strategy to shift focus from traditional oil and gas to expanding its low-carbon business.

As part of this strategy, BP has set a target to achieve cash cost savings of at least $2 billion by the end of 2026 relative to 2023 levels.

Financial health and market reaction

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BP’s cash flow decreased by 34% to $5 billion after restocking diesel and gasoline stocks ahead of the summer season.

Additionally, the company’s debt increased to $53 billion, and its debt-to-market capitalization ratio rose to 22% from 19.7% in the previous quarter.

Following the announcement, BP’s shares were down 0.2% at 0852 GMT, underperforming compared to a 1.5% gain for the European energy index.

As BP navigates these challenging times, the industry will closely watch how its new strategies and cost-saving measures unfold to regain footing and investor confidence in an increasingly competitive and volatile market.

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