BP reports record $28bn profit, rows back on cutting oil output

Profit surges amid rocketing energy prices

BP reported a record profit of $28 billion (€26.2 billion) for 2022 and hiked its dividend, but infuriated climate activists by rowing back on plans to slash oil and gas output and reduce carbon emissions by 2030.

The blockbuster profit follows similar reports from rivals Shell, Exxon Mobil and Chevron last week after energy prices surged in the wake of Russia’s invasion of Ukraine, prompting new calls to further tax the sector as households struggle to pay energy bills.

Three years after CEO Bernard Looney took the helm with an ambitious plan to pivot BP away from oil and gas towards renewables and low-carbon energy, the company said it will increase annual spending in both sectors by $1 billion with a sharper focus on developing low-carbon biofuels and hydrogen.

But it scaled back plans to cut oil output, now aiming to produce two million barrels of oil equivalent per day by 2030, down just 25 per cent from 2019 levels compared with previous plans for a 40 per cent cut.


As a result, BP reduced its ambitions to cut emissions from fuels sold to customers to 20-30 per cent by 2030, from 35-40 per cent. BP still aims to reduce its total emissions to net zero by 2050.

While many investors backed Mr Looney’s strategy, which he told Reuters “is working”, BP’s shares have significantly underperformed top western energy companies since the CEO took office, remaining largely flat compared with a 17 per cent gain for Shell and a nearly 80 per cent rise in Exxon shares.

“If the bulk of your investments remain tied to fossil fuels, and you even plan to increase those investments, you cannot claim to be aligned” with the 2015 UN-backed goals to battle climate change, Mark van Baal, founder of activist shareholder group Follow This said.

Rival Shell was ordered by a Dutch court in 2021 to commit to a 45 per cent reduction in its overall emissions by 2030 from 2019 levels, a decision Shell has appealed.

BP’s $4.8 billion fourth-quarter underlying replacement cost profit, its definition of net income, narrowly missed a $5 billion company-provided analyst forecast.

The results were impacted by weaker gas trading activity after an “exceptional” third quarter, higher refinery maintenance and lower oil and gas prices.

But for the year, BP’s $27.6 billion profit exceeded its 2008 record of $26 billion despite a $25 billion writedown of its Russian assets.

That allowed it to boost its dividend by 10 per cent to 6.61 cents per share, after halving it in the wake of the pandemic, and announce plans to repurchase $2.75 billion worth of shares over the next three months after buying $11.7 billion in 2022.

BP shares rose 5.4 per cent in London.

BP reiterated plans to divide its spending to 2030 equally between the oil and gas business and its energy transition businesses, upping the total budget to up to $18 billion from a previously guided upper range of $16 billion.

Transition businesses, such as renewables and electric vehicle charging, account for around 30 per cent of the current budget compared with 3 per cent in 2019.

BP kept it returns outlook for renewables largely unchanged at 6 per cent to 8 per cent, without taking into account debt, even though global offshore wind production costs have soared in recent months.

Mr Looney said BP’s wind and solar production will focus more on providing renewable power to generate biofuels and low-carbon hydrogen, doubling down, particularly in the United States where the landmark Inflation Reduction Act offers investment credits and tax cuts.

BP, whose trading operations further boost renewables returns, maintained plans to have 50 gigawatts (GW) of renewable projects under development and 10GW operating by 2030.

It said it expects returns of upwards of 15 per cent from its bioenergy business and its combined electric vehicle charging and convenience store businesses, while looking for double-digit returns on hydrogen.

It aims to translate this into a core profit from the transition businesses of $10 billion-$12 billion by 2030, out of targeted total group earnings before interest, tax, depreciation and amortisation (EBITDA) of $51 billion-$56 billion.

BP also wants to increase its focus on renewable natural gas having last year acquired US producer Archaea Energy for $4.1 billion, and it has also set a target to produce 0.5 million-0.7 million tonnes a year of low-carbon hydrogen to initially supply its own refineries.

BP, which increased its 2030 oil price forecast by $10 to $70 a barrel, will focus its global oil and gas operations in nine regions, with plans to sharply increase output from its US shale business and in the Gulf of Mexico. – Reuters