BP Plc increased share buybacks following the highest profit in nearly a decade as a result of surging oil and gas prices.
The London-based company followed in the footsteps of Exxon Mobil Corp., Chevron Corp., and Shell Plc, which are all returning capital to investors following years of subpar returns. BP will repurchase an additional $1.5 billion of shares using excess cash flow from 2021 before the company releases its first-quarter results later this year.
“At around $60 oil, we have the capacity to buy back approximately $4 billion in shares per year,” Chief Executive Officer Bernard Looney said in a Tuesday interview with Bloomberg TV. “Clearly, if prices rise, the opportunity for increased buybacks exists.”
According to Redburn analysts, BP’s earnings statement implies total share repurchases of $6 billion for the year. This is more than the $5 billion previously forecast, but “not as aggressive an increase as seen at Shell last week.”
At 8:19 a.m. in London, the company’s shares rose 1.7 percent to 415.5 pence, a gain of nearly 60% over the previous year.
For the period, adjusted net income was $4.07 billion, up from $115 million a year ago and exceeding the average analyst estimate of $3.87 billion. Cash flow from operations was $6.12 billion, up from $2.27 billion a year ago.
The return on average capital employed, a metric that indicates how well a company invests its shareholders’ money, increased to 13.3 percent in 2021, surpassing Shell’s fourth-quarter return of 8.8 percent.
In comparison to rival Shell, BP’s sprawling and secretive trading business does not appear to have benefited from the fourth-quarter price volatility. The company reported “significantly lower results from oil trading and an average contribution from gas marketing and trading, as well as the impact of higher energy costs.”
The results demonstrate how far BP has come since the pandemic began, having paid off more than $8 billion in net debt and increasing its dividend in the last year. Additionally, the company pledged to increase investments moderately, albeit from a historically low level.
Capital expenditures will increase to between $14 billion and $15 billion this year, up from $12.8 billion in 2021, and will remain within that range through 2025. By then, BP intends to invest more than 40% of its capital in energy transition businesses. Additionally, the company stated that it could achieve net-zero emissions earlier than the 2050 target.
“The last two years have strengthened our conviction in the opportunities presented by the energy transition,” Looney said in a statement.