BP, one of the world’s largest energy companies, has reported a significant decline in profits due to the drop in oil prices. The company’s profits for 2023 were $13.8 billion, down from a record $27.7 billion the previous year. This decline follows a similar trend seen by rival company Shell, who also reported a decrease in profits.
The drop in oil prices can be attributed to various factors, including the aftermath of Russia’s invasion of Ukraine. Following the invasion, there were concerns about potential disruptions to energy supplies, leading to a surge in oil and gas prices. Energy firms, including BP and Shell, benefited greatly from this price increase. However, as the situation stabilized and fears subsided, oil prices began to fall again.
Despite the decline in profits, BP’s earnings are still relatively high compared to previous years, with the exception of 2022. The company plans to return $1.75 billion to investors through share buybacks in the first quarter of this year, with a commitment to $3.5 billion of buybacks over the first half of 2024.
BP’s new chief executive, Murray Auchincloss, took over the role after the resignation of Bernard Looney in September 2023. Looney stepped down after admitting that he had not been fully transparent about his past personal relationships within the company. The board deemed this as “serious misconduct,” resulting in Looney forfeiting up to £32.4 million in pay and benefits.
Last year, BP faced criticism from environmental groups for scaling back its plans to reduce oil and gas production by 2030. Campaign group Global Witness argues that shareholders should prioritize a rapid transition to clean energy, rather than focusing on shareholder payouts.
However, not all investors share this sentiment. BlueBell Capital Partners recently called on BP to abandon its targets for lower oil and gas output altogether, deeming them “irrational.”
In addition to the decline in profits, BP faced challenges in shipping due to rebel attacks in the Red Sea. The company, along with others, diverted ships away from the Suez Canal, a crucial route for the transportation of oil and liquefied natural gas between Asia and Europe.
Overall, BP’s financial results reflect the volatility of the oil and gas industry, with profits heavily influenced by fluctuations in oil prices. The company’s commitment to returning capital to investors and its expectations for higher oil production this year demonstrate its determination to navigate through challenging times. However, criticism from environmental groups and differing opinions among investors highlight the ongoing debate surrounding the future of fossil fuel companies and their role in the transition to clean energy.
