BP reports 1Q profit jump, resumes share buybacks
BP reported a strong set of quarterly results today and confirmed that it is embarking on a share buyback programme thanks to a sharp reduction in net debt. But it also warned of headwinds in the second quarter.
Excluding inventory valuation effects, BP made a profit of $3.3bn in January-March, compared with $825mn in the previous three months and a loss of $628mn in the first quarter last year. The company said its results were driven by "an exceptional gas marketing and trading performance, significantly higher oil prices and higher refining margins". BP published today's results under its new structure for the first time, with the former Upstream and Downstream segments replaced by Gas & Low Carbon Energy, Oil Production & Operations, and Customers & Products.
The strong performance came despite a sharp drop in production. Excluding its stake in Russian state-controlled Rosneft, BP's oil and gas output fell by 14pc on the year to 2.22mn b/d of oil equivalent (boe/d) in the first quarter, driven by divestments in the US. The firm said it expects second-quarter production to be lower than the first quarter as a result of asset sales and seasonal maintenance in the US Gulf of Mexico, the North Sea, and Trinidad and Tobago, partly offset by the ramp-up of new gas projects in Egypt and India.
Crude runs at BP's operated refineries declined to 1.6mn b/d in the first quarter from 1.81mn b/d a year earlier. The company expects higher demand for oil products in the second quarter as Covid-19 restrictions ease and vaccination rollouts continue. "This should help provide some support to industry refining margins", it said. "However, realized refining margins are expected to show a smaller improvement due to the slower recovery in diesel and jet demand and a narrower North American heavy crude oil differential." BP also flagged up a higher level of refinery maintenance in the second quarter.
Debt milestone
The firm's net debt — excluding leases — was $33.3bn at the end of March, down from $38.9bn at the start of the year and below its $35bn target. The decline was underpinned by $4.8bn of divestment proceeds in January-March and a steep jump in operating cash flow to $6.1bn from just $952mn a year earlier. "With the acceleration of divestment proceeds, together with strong business performance and the recovery in the price environment, we generated strong cash flow and delivered on our net debt target around a year early," chief executive Bernard Looney said.
Reaching the milestone early has prompted the firm to resume share buybacks. It plans to repurchase $500mn worth of stock in April-June and said it "remains committed to returning at least 60pc of surplus cash flow to shareholders through share buybacks, subject to maintaining a strong investment grade credit rating".
After paying capital expenditure (capex), dividends and reducing net debt to the $35bn target, BP said it was left with surplus cash flow of $1.7bn in the first quarter. But it expects a cash flow deficit in the second quarter because of "the $1.2bn pre-tax annual Gulf of Mexico oil spill payment, further severance payments and a smaller improvement in realized refining margins relative to the quarter-to-date rise in our refining marker margin". For the whole of 2021, BP said it expects its divestment proceeds to reach $5bn-6bn, capex to come in at around $13bn and upstream production to be lower than 2020.
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New ISO 8217 eyes wider scope for alternative fuels
New ISO 8217 eyes wider scope for alternative fuels
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Peninsula eyes B100 marine fuel supply in Barcelona
Peninsula eyes B100 marine fuel supply in Barcelona
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Oman latest to insist that oil, gas is 'here to stay'
Oman latest to insist that oil, gas is 'here to stay'
Muscat, 24 April (Argus) — Omani and Oman-focused energy officials this week joined a growing chorus of voices to reiterate the pivotal role that hydrocarbons have in the energy mix, even as state-owned companies scramble to increase their share of renewables production. Some producers cite the risk of leaving costly, stranded oil and gas assets as renewable energy alternatives become more favoured. "This is a common concern among producers who are focusing on short-term developments to maximize cash flow — [but] if we continue to do that, with the clean energy transition, will we be left with stranded assets in the long-term", state-controlled PDO's technical director Sami Baqi told the Oman Petroleum and Crude Show conference in Muscat this week. "We need to redefine and revamp our operation model to produce in a sustainable manner." "We are in an era where most of the production does not come from the easy oil but comes from difficult oil," Oman's energy ministry undersecretary Mohsin Al Hadhrami said. "It requires more improved and enhanced oil recovery (EOR) type technologies to extract it." Oman is heavily reliant on tertiary extraction technologies like EOR given its maturing asset base and complicated geology. "We know that most of the oil fields [in the region] are maturing and costs are going to escalate, so we need to be mindful of it while discussing cleaner solutions going forward," Hadhrami said. PDO, Oman's largest hydrocarbon producer, aims for 19pc of its output to come from EOR projects by 2025, and has said it is looking at 'cleaner' ways to implement the technology. PDO in November started a pilot project to inject captured CO2 for EOR at its oil reservoirs. Baqi's concerns were echoed by PDO's carbon capture, utilisation and storage (CCUS) manager Nabil Al-Bulushi, who said even solutions like CCUS can be expensive and come with their own challenges. There is a need for a proper ecosystem or regulatory policies to avoid delays in executing such projects, he said. When it comes to challenges associated with commercialising green hydrogen, Saudi state-controlled Aramco's head of upstream Yousef Al-Tahan said higher costs already make hydrogen more expensive than any other energy sources. "Not only should the costs go down, but the market has to be matured to take in the hydrogen," he said. "We also need pipelines and facilities that are able to handle hydrogen, especially when it gets converted to ammonia." Gas here to stay Oman, like many of its neighbors in the Mideast Gulf, insists gas needs to be part of the global journey towards cleaner energies. "Asia-Pacific is still heavily reliant on coal, this is an area where gas can play an important role," Shell Oman's development manager Salim Al Amri said at the event. "I think there is no doubt that gas is here to stay." Oman is a particularly interesting case as it "has moved from a position of gas shortage to surplus", Al Amri said, enabled by key developments in tight gas. "Output from fields like Khazzan and Mabrouk will continue to produce nearly 50pc of output even by 2025, which is indicative of how important tight gas developments are," he said. The Khazzan tight gas field has 10.5 trillion ft³ of recoverable gas reserves. Mabrouk North East is due to reach 500mn ft³/d by mid-2024. But even as natural gas is touted as the transition fuel, executives from major producers like state-owned OQ and PDO warned there are technical risks associated with extracting the fuel, including encountering complex tight reservoirs, water production and difficult geology. By Rithika Krishna Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
Australia’s Woodside pledges extra domestic gas in 2025
Australia’s Woodside pledges extra domestic gas in 2025
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