BP swung to an annual profit as the UK oil major presses ahead with its clean energy transition.
BP on Tuesday reported a jump in earnings boosted by higher oil prices as the company said its transformation to an integrated energy company remains on track.
For 2021, BP posted attributable profit of $7.57 billion, swinging from a $20.31 billion loss in 2020. For the three months to December 31, attributable profit was $2.33 billion, swung from $2.54 billion loss in the fourth quarter of 2020.
For 2021, replacement cost profit - BP’s preferred metric - was $4.74 billion, swung from $18.10 billion loss the year before. For the fourth quarter, RC profit was $1.97 billion, swung from $2.93 billion loss during the same period in 2020.
Underlying RC profit was $4.07 billion for the fourth quarter, up from $115 million a year before. For all of 2021, it was $12.82 billion, swung from a $5.69 billion loss.
Allegra Dawes, a senior analyst at Third Bridge, said the fourth quarter underlying RC profit beat market consensus of $3.9 billion.
Further, BP said net debt was reduced for the seventh quarter in a row to $30.6 billion end 2021.
BP declared a 2021 dividend of 21.63 cents per share, down from 26.25 cents in 2020. For the fourth-quarter, the company declared a 5.46 cents dividend, unchanged from the third quarter, but up from 5.25 cents in the fourth quarter of 2020.
In addition, BP said it intends to execute a further $1.5 billion share buyback from 2021 surplus cash flow prior to announcing its first quarter 2022 results. It has executed a share buyback of $500 million so far this year to offset the expected full year dilution from the vesting of awards under employee share schemes in 2022.
Based on BP’s current forecasts, at around $60 per barrel Brent oil and subject to the board’s discretion each quarter, the oil major expects to be able to deliver share buybacks of around $4.0 billion per annum and have capacity for an annual increase in the dividend per share of around 4% through 2025.
Separately, BP said it is now aiming to sustain earnings from resilient hydrocarbons out to 2031, despite focusing its oil and gas production and refining throughput. It also expects to increase the proportion of its capital expenditure in ‘transition growth businesses’ to more than 40% by 2025 and is aiming for around 50% by 2030. It aims to generate earnings of $9 billion to $10 billion from these businesses by 20302, driven by five transition growth engines - bioenergy, convenience, electric vehicle charging, renewables and hydrogen.
‘2021 shows BP doing what we said we would - performing while transforming. We’ve strengthened the balance sheet and grown returns. We’re delivering distributions to shareholders with $4.15 billion of buybacks announced and the dividend increased. And we’re investing for the future. We’ve made strong progress in our transformation to an integrated energy company: focusing and high grading our hydrocarbons business, growing in convenience and mobility and building with discipline a low carbon energy business - now with over 5GW in offshore wind projects - and significant opportunities in hydrogen,’ said Chief Executive Officer Bernard Looney.
Dawes of Third Bridge commented: ‘The reputations of renewable companies have underperformed over the past year and it remains to be seen whether companies like BP can generate returns from these new business areas. While BP has strengthened their financial position in 2021, there remain significant challenges in meeting present day energy demand while planning for a low carbon future.’
BP shares were up 1.7% early Tuesday.
Here is what you need to know at the London market open:
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MARKETS
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FTSE 100: up 0.6% at 7,615.21
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Hang Seng: down 1.0% at 24,329.49
Nikkei 225: closed up 0.1% at 27,284.52
S&P/ASX 200: closed up 1.1% at 7,186.70
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DJIA: closed up 1.39 points at 35,091.13
S&P 500: closed down 0.4% at 4,483.87
Nasdaq Composite: closed down 0.6% at 14,015.67
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EUR: down at $1.1400 ($1.1438)
GBP: down at $1.3514 ($1.3534)
USD: up at JP¥115.50 (JP¥115.05)
Gold: up at $1,817.87 per ounce ($1,816.81)
Oil (Brent): down at $92.50 a barrel ($92.98)
(changes since previous London equities close)
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ECONOMICS AND GENERAL
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Tuesday’s key economic events still to come
0830 EST US international trade in goods & services
1000 EST US IBD/TIPP economic optimism index
1630 EST US API weekly statistical bulletin
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The UK retail sector had a strong start to 2022, with a combination of inflation, easier comparatives and a slight return to some pre-virus trends lifting sales in January. According to the latest British Retail Consortium-KPMG tracker, retail sales jumped 12% yearly in January. They had fallen 1.3% last January, a month when the UK was under lockdown. Compared to pre-pandemic times, UK retail sales were 7.5% higher. January 2022’s annual growth tops the six-month average of 6.0%. Over the three months to January, food sales ticked down 0.1%, though non-food sales surged 11%. In-store non-food sales were 68% higher annually over the three-month period.
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BROKER RATING CHANGES
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Jefferies starts BAE Systems with ’buy’ - price target 695 pence
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Morgan Stanley raises St James’s Place to ’overweight’ (equal-weight) - price target 1,900 (1,786) pence
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Morgan Stanley raises M&G to ’overweight’ (equal-weight) - price target 270 (240) pence
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COMPANIES - FTSE 100
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Online grocer Ocado hailed its investment into new technologies and it has ‘re-set the bar’ within grocery via its Ocado Smart Platform. For the financial year that ended November 28, Ocado generated revenue of £2.5 billion, up 7.2% from £2.33 billion in financial 2020. It posted a pretax loss of £176.9 million, widened from a loss of £52.3 million. Ocado said the loss reflected increased investment in its Solutions business, particularly the increasing roll out of the Ocado Smart Platform. The retailer said it saw ‘resilient’ sales growth of 4.6% in the year, driven by a 22% increase in customer numbers to 832,000. This brought an increase in orders of 12%, to 357,000, offset by a reduction in basket size of 5.8% to £129. Ocado highlighted the results were constrained in the second half by the still-tight labour market in the UK, as well as reduced capacity at one of its fulfilment centres because of a fire in July.
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DCC said operating profit for the third quarter ended December 31 was in line with expectations and ahead of the prior year. The Dublin-based support services firm said it delivered a good trading performance and benefited from acquisitions completed in the prior year. Further, DCC said the growth was achieved against the anticipated negative impact of currency translation. DCC continued to develop during the period and completed the acquisition of Almo, DCC’s largest acquisition to date, at the end of the quarter. Looking ahead, DCC continues to expect that the financial year ending March 31 will be another year of strong operating profit growth, in line with current market consensus expectations.
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Citigroup Global Markets said it placed 58 million shares of Airtel Africa, a 1.5% stake, on behalf of shareholders Warburg Pincus and Morningstar Investment. The shares were sold at 140 pence each, raising £81.2 million. Citigroup didn’t say how many Airtel Africa shares the two sellers have remaining, but noted they have agreed to a 90-day lock-up period for any they own. Airtel Africa won’t receive any proceeds of the sale, as it was of existing shares. The stock was down 11% at 138.61p early Tuesday.
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COMPANIES - FTSE 250
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Anglo-German holiday operator Tui said revenue rose in the three months to the end of December amid a relaxation of travel restrictions, but bookings for the current quarter were hurt by the emergence of the Omicron variant of Covid-19. Tui said it currently has 6.0 million bookings across the Winter 2021-22 and Summer 2022 holiday seasons, with an acceleration in bookings since the start of 2022, as confidence in international travel improves. Winter 2021-22 bookings stand at just 58% of Winter 2018-19 levels, meaning pre-pandemic, and Tui said it expects winter capacity to come in at the bottom of its guided range of 60% to 80% of pre-pandemic levels. More positively, Summer 2022 bookings are 72% of Summer 2019 levels, with recent bookings showing the same pattern as in January 2019, Tui said. In the UK, the removal of testing requirements gave a boost to bookings, and Summer 2022 bookings currently are 19% ahead of Summer 2019, the Hannover, Germany-based company said.
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COMPANIES - GLOBAL
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BNP Paribas reported a strong result in 2021 as the Domestic Markets division performed well, leading to a sharp jump in profit for the Paris-based bank. Revenue for 2021 rose 4.7% to €43.76 billion from €41.78 billion the year before, lifted as commission income increased 13% to €15.04 billion from €13.30 billion. This helped to offset interest income slipping 5.3% to €29.52 billion from €31.17 billion. Before IFRS 5, revenue for 2021 stood at €46.24 billion. BNP highlighted that this was up 4.4% on 2020 and 3.7% higher than pre-pandemic 2019. Pretax profit jumped 36% to €12.74 billion from €9.34 billion, as cost of risk declined 45% to €2.97 billion from €5.40 billion.
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Tuesday’s shareholder meetings
Barkby Group PLC - AGM
Numis Corp PLC - AGM
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