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British oil and gas enterprise BP (British Petroleum) unveiled its first-quarter earnings on Tuesday, revealing a net profit that fell short of market expectations amid a strategic shift and declining crude prices.
The company reported an underlying replacement cost profit of $1.38 billion for the first three months of the year, which was below analyst forecasts of $1.6 billion, based on LSEG-complied consensus data.
For context, BP’s net profit stood at $2.7 billion a year earlier and had dropped to $1.2 billion in the last quarter of 2024.
This latest performance comes as BP grapples with pressure from activist shareholders, following a strategic overhaul announced just under two months ago.
In February, BP aimed to regain investor confidence after a prolonged period of underperformance compared to competitors by committing to cut renewable spending while increasing investments in its primary oil and gas operations.
During an appearance on CNBC’s “Squawk Box Europe,” BP CEO Murray Auchincloss asserted that the company had made a promising start toward executing its new strategy. He noted, “We had a great operational quarter, marking our highest upstream operating efficiency in history. Our refineries achieved their best performance in 24 years, and we recorded six consecutive exploration discoveries, which is quite unusual. We also initiated three major projects.”
For Q1, BP announced an ordinary dividend of 8 cents per share alongside a share buyback program totaling $750 million.
However, the company’s net debt increased to $26.97 billion during the January-March period, a rise from $22.99 billion at the end of the previous quarter. BP had earlier cautioned about reduced upstream production and rising net debt in the first quarter compared to the final three months of last year.
Activist Investors Step In
The company’s shift away from its green strategy has been met with criticism from activist investors, notably Elliott Management, which disclosed a stake exceeding 5% in BP last week. This move positions Elliott as the second-largest shareholder, following BlackRock, according to LSEG data.
Reports indicate that Elliott began acquiring shares in BP back in February, prompting a rally in the company’s stock as investors anticipated that Elliott’s involvement might encourage BP to reassess its focus on oil and gas.
BP’s Auchincloss refrained from commenting on the company’s relationship with investors and declined to address whether Elliott’s pressure influenced the firm’s current strategies.
Earlier this month, BP faced significant shareholder dissent at its annual general meeting, where nearly a quarter of investors (24.3%) voted against the re-election of outgoing Chair Helge Lund. This vote highlighted a broader sense of dissatisfaction among shareholders.
Mark van Baal, founder of the Dutch activist investor group Follow This, expressed hope that the shareholder backlash would prompt a search for a new chair who is both “climate competent” and resistant to rapid responses to short-term investor pressures. Lund is expected to leave his position next year.
Potential Takeover Talks
BP’s relative underperformance when compared to industry titans like Exxon Mobil, Chevron, and Shell has fueled speculation that it could become a target for acquisition. However, analysts have expressed skepticism about whether potential suitors will move forward with offers.
In response to queries regarding takeover speculation, Auchincloss stated that BP has not sought any protective measures from the British government and emphasized the company’s commitment to independence and growth. “We are a strong, independent company with sector-leading growth. The first quarter serves as a great example of our trajectory,” he said.
Recent months have seen a decline in oil prices, with June delivery of international benchmark Brent crude trading at $65.19 per barrel on Tuesday, down over 1% for the session, and significantly lower than the $84 per barrel mark from a year prior.
When asked if falling crude prices might jeopardize BP’s plans, Auchincloss reassured that the company’s diverse range of products, including oil, natural gas, and refined products, continues to generate revenue effectively.
— Additional reporting by CNBC’s Ruxandra Iordache contributed to this article.
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