BP earnings hunch as oil big ramps-up fossil gas manufacturing

BP’s profits plunged far below expectations in the first quarter owing to divestments and weaker refining margins.

The oil supermajor, which is ramping up fossil duel production under boss Murray Auchincloss, also announced the departure of its head of strategy, Giulia Chierchia, who played a pivotal in its now-abandoned green strategy. 

Chierchia, who has reportedly been the target of pressure from a top hedge fund invested in BP, will not be replaced.   

It came as BP reported an underlying replacement cost (RC) profit of $1.38billion for the three months ending March.

The result was approximately half the $2.7billion BP made last year and less than the $1.53billion forecast by analysts.

Earnings suffered from the disposal of assets in Egypt and Trinidad and Tobago, where the group recently sold some offshore gas fields and associated production facilities to Perenco T&T.

BP also said it was hit by decreasing refining margins, an ‘average’ contribution from oil trading, and weakness in its gas marketing and trading arm.

While its underlying RC profits were over $200million up from the previous quarter, BP’s net debts soared by $4billion to almost $27billion, mainly due to lower operating cash flow.

Poor results: BP’s profits plunged far below expectations in the first quarter

During the period, the company launched a new strategy that includes expanding investments on fossil fuels while drastically reducing renewables spending.

It plans to increase annual investment to $10billion for oil and gas projects, but slash funding on ‘energy transition’ activities to between $1.5billion and $2billion per year.

At the same time, BP wants to achieve $4billion to $5billion of structural cost cuts, and slash net debts to between $14billion and $18billion by the end of 2027.

Auchincloss, chief executive of BP, has spearheaded this new plan amidst pressure from investors like US hedge fund Elliott Management for the company to become more profitable.

The Canadian-born boss said on Tuesday that the firm had ‘already made significant progress’ with the strategy reset, including three major projects and six exploration discoveries.

He added: ‘We continue to monitor market volatility and changes and remain focused on moving at pace.

‘I’m confident that our plans to strengthen the balance sheet, reduce costs, and improve cash flow and returns will grow long-term shareholder value and strengthen the resilience of BP.’

Auchincloss was previously the oil giant’s chief financial officer until permanently succeeding Bernard Looney as CEO in January last year.

Under Looney’s leadership, BP committed to achieving ‘net zero’ emissions by 2050, partly by investing in more low-carbon businesses.

He resigned in September 2023 after failing to fully disclose his past relationships with some BP employees.

BP shares were 3.95 per cent lower at 347.7p on Tuesday morning, taking their losses over the past year to around a third.

Mark Crouch, market analyst at eToro, said: ‘Regardless of one’s stance on fossil fuels, one thing is clear, renewables have not delivered as expected for BP, dealing a notable blow to its share price.’