Oil major BP is the latest oil company to announce robust profit levels, declaring $1.38 billion for the first quarter of 2023. This outcome was well below analyst expectations and highlights the continued struggle that persists within the energy industry. The company’s profit based on underlying replacement cost was $1.6 billion. This figure was mostly below projections because of lower than expected crude prices, which have put a damper on revenue collection.
Correspondingly, the reported net profit is a dramatic drop from prior quarters, causing investors to raise eyebrows. In that time BP’s net debt more than doubled, reaching a shocking $26.97 billion. It increased markedly from $22.99 billion at the end of fourth quarter. BP has been one of the oil companies enjoying a massive debt expansion. This increase comes amid increasing pressure from activist investors, like Elliott Management, which purchased a stake in the company earlier this year.
Although these financial headwinds were raised, BP had some significant operational milestones during the first quarter. During the second quarter, the company delivered its best upstream operating efficiency in history. On the refining side, its refineries just produced their best quarter in 24 years! BP toasted six straight exploration discoveries and kicked off three new major projects in this time span.
BP has announced a dividend of 8 cents per ordinary share, demonstrating its strong operational success. Plus, the company started a $750 million share repurchase plan to return cash to its stockholders. These announcements came at a high point of shareholder anger. Almost one investor in four expressed their opposition in this way, by voting against the re-election of the outgoing Chair Helge Lund.
To which BP Chief Financial Officer, Murray Auchincloss responded, “Hell, no! We go for the right product mix, oil, natural gas, and refined products that are fundamental to maximizing our revenue.
He focused on the remarkable operational successes. “We are encouraged by the strong operational quarter we delivered with our highest upstream operating efficiency ever achieved. Our refineries operated at historic highs of 98.3%, we welcomed six straight months of successful exploration discoveries, and we started three large projects.”
BP’s position is still very tricky as it undergoes a radical transition in an unpredictable energy market and in the face of intense shareholder pressure. BlackRock stands as BP’s largest shareholder while the U.S.-based hedge fund, which is the company’s second-largest shareholder, continues to advocate for changes within the organization.