BP Plc surged to a two-month high after accelerating share buybacks, as the company’s new boss sought to woo investors that have been skeptical of its clean-energy strategy.
After fourth-quarter profit exceeded estimates, the London-based oil and gas major said it will repurchase $1.75 billion of shares each quarter in the first half of the year, compared with $1.5 billion in the prior three months. The company went even further to reassure shareholders, some of whom have criticized its low-carbon plans, saying it intends to maintain at least this pace of buybacks until the end of next year.
“We’ve got real confidence,” Chief Executive Officer Murray Auchincloss, who was appointed last month, said in an interview with Bloomberg on Tuesday. “And that confidence in the growth has allowed us to issue new guidance on how we’re thinking about buybacks.”
Shares of the company rose 6% to 481.15 pence as of 9:09 a.m. in London.
BP follows a strong set of results for Big Oil in the fourth quarter, with Exxon Mobil Corp., Chevron Corp. and Shell Plc all surpassing expectations. Its earnings announcement caps a tumultuous few months that saw the abrupt resignation of former CEO Bernard Looney, a swell of rumors that it was a potential takeover target, and most recently calls from activist investor Bluebell Capital Partners to divert spending from renewables into oil and gas.
BP’s adjusted net income for the three months ended Dec. 31 was $2.99 billion, compared with $4.81 billion a year earlier and $3.29 billion in the third quarter. That exceeded the average estimate of $2.76 billion.
The increase in the buyback is a reflection of the company’s falling net debt, which at $20.9 billion is the lowest in a decade, according to Auchincloss. While BP still wants to bring that figure down a little further, the reduction has allowed it to commit to return 80% of surplus cash to shareholders, up from its previous pledge of 60%.
This change addresses “a bit of feedback we received that sometimes people are a bit uncertain as to what the buyback is going to be,” Auchincloss added.
BP’s earnings beat was “relatively low quality” but the increase in the buyback should be taken very positively, Redburn analysts said in a note.
As Auchincloss pledged to return more cash to shareholders, he kept a tight rein on capital expenditure. BP will target spending of $16 billion both this year and next, compared with a previous range of $14 billion to $18 billion.
The tighter spending will mostly come down to there being “less room” for acquisitions following a slew of purchases such as Archaea Energy and TravelCenters of America, Auchincloss said.