BP to resume buybacks after Q1 profits beat expectations

British energy company BP on Tuesday reported better-than-expected first quarter profits on the back of higher oil prices as it hit its debt reduction target early and said it would resume share buybacks in the second quarter.

BP’s first-quarter underlying replacement cost profit, the company’s measure of net profit, came in at $2.6bn compared with a $115m in the final quarter of 2020 and $791m a year earlier.

"This result was driven by an exceptional gas marketing and trading performance, significantly higher oil prices and higher refining margins," the company said.

Analysts had expected a first-quarter profit of $1.4bn. A wave of disposals worth $4.8bn and stronger oil prices helped to cut net debt by $5.6bn to reach $33.3bn at the end of the quarter, below BP’s $35m target and a year ahead of schedule.

The company will now embark on a $500m round of share buybacks in the next quarter for investors who saw dividends halved at the start of the Covid-19 pandemic which battered the industry, sparking a collapse in demand and wiping out profits, forcing companies to make massive writedowns and cuts thousands of jobs.

A dividend of 5.5p-a-share was declared, unchanged from the previous quarter, but 50% lower than last year 10.50p.

BP said it expected oil demand to recover in 2021 due to strong growth in the US and China as Covid-19 vaccination programmes accelerated.

The company said it would provide an update on the third quarter buyback programme later this year.

Chief executive Bernard Looney aims to move the energy giant's focus from oil to low carbon energy investments by selling $25bn in assets by 2025.

Benchmark Brent oil prices recovered to hit an average of $61 a barrel in the first quarter from $44 in the previous quarter and $50 in the first three months of 2020. BP said it expected global oil inventories, which soared as demand dried up during the pandemic, to fall to historic levels by the end of this calendar year.