London — British energy giant BP on Tuesday reported a deeper-than-expected 48% drop in net profit to $1.4bn on weaker gas trading and refining results, and announced the departure of its strategy chief as it tries to shore up investor confidence.
Under pressure to improve profitability and cut costs, CEO Murray Auchincloss has announced plans to sell $20bn of assets through to 2027 and reduce spending and share buybacks.
BP has abandoned a move to slash hydrocarbon production and boost its low-carbon business, plans pushed by strategy and sustainability chief Giulia Chierchia, who announced on Tuesday that she would step down on June 1.
US fund manager Elliott Investment Management had wanted a change of strategy chief as it seeks higher free cash flow through deeper cuts to spending and costs, sources familiar with the matter told Reuters.
BP’s shares have lagged peers since its foray into renewables under previous CEO Bernard Looney, who brought Chierchia into BP.
Since Auchincloss’s strategy revamp in February, BP’s shares have lost 20%, compared with 7.5% and 1.8% drops for rivals Shell and Exxon, respectively.
BP shares were down about 2.8% at 2.04pm GMT, compared with a 0.6% fall in a wider index of energy companies.
BP posted a first-quarter underlying replacement cost profit, or adjusted net income, of $1.38bn — below the $1.53bn expected by analysts in a company-provided poll.
That was down from $2.7bn a year earlier.
Profit at its gas and low-carbon unit was down about 40%, hit by weaker trading and lower production after asset sales.
Its customers and products business was down by about 47%.
BP said it expects to conduct a heavy refinery maintenance programme in the second quarter, which probably means lower output.
Amid an industry-wide fall in refining profitability, BP’s refining margins averaged $15.20 a barrel in the first quarter, down from $20.60 a year earlier.
BP is buying back $750m in shares for the quarter, at the low end of its guided range, a stark slowdown from buybacks that totalled $7.1bn last year.
Finance chief Kate Thomson said BP would provide no guidance on the size of future buybacks.
BP increased its outlook for asset sales this year to $3bn-$4bn from $3bn previously. It also cut its spending outlook for this year by $500m to $14.5bn and reiterated its $13bn-$15bn target for next year and 2027.
Global benchmark Brent crude prices averaged about $75 a barrel during the January-March quarter, compared with about $87 a year earlier.
Earlier this month, oil prices went into free fall after US President Donald Trump announced tariffs on trading partners and Brent is now hovering about $66 a barrel.
“In the event of sustainably lower prices, we would expect deflation to become evident across our capital plans and we see about $2.5bn of further capital flexibility, should we require it,” Auchincloss said in a presentation.
“This is equivalent to about $10 a barrel of oil price sensitivity.” He added in a conference call, that executing this option for further spending cuts would hit its long-term growth.
Elliott has increased its stake in BP to just over 5%, placing it between top shareholders BlackRock and Vanguard, LSEG data shows.
Reuters
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