Shares of the British oil and gas giant, BP (NYSE: BP) fell in pre-market trading at the time of publishing on Tuesday as the company experienced a big drop in profits. The company reported underlying replacement cost profit, used as a proxy for net profit, of $4.96 billion for the first quarter versus $6.25 billion in the same period last year but higher than consensus estimates of $4.3 billion. The underlying replacement cost profit per American Depository Share (ADS) was $1.66 in Q1 versus $1.92 in the same period last year and beating Street estimates of $1.38 per ADS.
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BP reported sales and other operating revenues of $56.18 billion, a decline of 14.1% year-over-year versus consenus estimates of $56.84 billion. The company also reduced its net debt to $21.2 billion from $27.5 billion in the same period a year back. BP announced a dividend of 6.61 cents per ordinary share, after a 10% increase in February.
BP is also going slow on its stock buyback program. The company announced a further share buyback of $1.75 billion, which it expects to complete before the announcement of its Q2 results in August. BP already completed its previously announced stock buyback program worth $2.75 billion on April 28.
Looking forward, management now expects to buyback stock worth $4 billion per annum “at the lower end of its $14-18 billion capital expenditure range, and have capacity for an annual increase in the dividend per ordinary share of around 4%,” as it has forecasted Brent crude at $60 per barrel. It has projected FY23 capex to be between $16 billion and $18 billion.
When it comes to oil production, BP expects “second-quarter 2023 reported upstream production to be lower compared to first quarter 2023, in both oil production & operations and gas & low carbon energy, including the effects of seasonal maintenance, with the impact predominantly in higher margin regions. “
Analysts are cautiously optimistic about BP stock with a Moderate Buy consensus rating based on six Buys and three Holds.
