BP shares rise but oil giant faces clean energy challenge            

Company said it already achieved its €29.7bn debt target, reaching the threshold at which it has said it can restart share buybacks about a year earlier than expected

BP’s shares rose in London trade, extending their gain this year to 18%.

BP said it already achieved its $35bn (€29.7bn) debt target, reaching the threshold at which it has said it can restart share buybacks about a year earlier than expected.

The news reflects an accelerated pace of asset sales and improved business performance, with BP’s trading division capitalising on dramatic moves in energy markets. 

It marks a potential turning point following a tumultuous year for the industry, in which fuel sales and refining margins were hammered by the impact of the coronavirus pandemic.

So far this year, a “very strong” business performance driven by trading, prices and “resilient operations” has brought borrowings down, the London-based oil giant said.

Having reached its debt goal, “BP is committed to returning at least 60% of surplus cash flow to shareholders by way of share buybacks”.

Boon to investors

The move will be a boon to investors, many of whom had seen peer Royal Dutch Shell as being ahead of the game in returning cash to shareholders, having slightly raised its dividend only two quarters after it was slashed. 

BP cut its payout last August, a policy u-turn after boosting it just a few quarters earlier.

BP’s shares rose in London trade, extending their gain this year to 18%.

“Given where the stock price is, we expect more than 60% of surplus free cash flow to be allocated to buybacks,” Oswald Clint, an analyst at Sanford C Bernstein said in a research note. 

The energy company also made a strong profit from liquefied natural gas trading in the first quarter, he said.

While the market welcomed BP’s announcement, the firm’s value is still down by a third from pre-pandemic levels. 

That reflects struggles on several fronts, from the lingering effects of the virus crisis to the overhaul of the business amid the energy transition. 

Slashing emissions

BP has laboured over the past year to convince investors it can generate high returns while slashing emissions and ramping up clean-energy investments.

It’s also selling a raft of assets – including a stake in a large Omani gas project and an interest in data firm Palantir Technologies – and plans to offload $25bn worth by 2025. 

BP received about $4.7bn from disposals in the quarter through March, and now expects such proceeds in 2021 to be at the top end of its $4bn to $6bn range, it said on Tuesday.

• Bloomberg