BP plc (LON:BP) has announced its results for the fourth quarter and full year 2023.
| 2023 : A year of delivery |
| Financial summary | Fourth | Third | Fourth | ||||
| quarter | quarter | quarter | Year | Year | |||
| $ million | 2023 | 2023 | 2022 | 2023 | 2022 | ||
| Profit (loss) for the period attributable to bp shareholders | 371 | 4,858 | 10,803 | 15,239 | (2,487) | ||
| Inventory holding (gains) losses*, net of tax | 1,155 | (1,212) | 1,066 | 944 | (1,019) | ||
| Replacement cost (RC) profit (loss)* | 1,526 | 3,646 | 11,869 | 16,183 | (3,506) | ||
| Net (favourable) adverse impact of adjusting items*, net of tax | 1,465 | (353) | (7,062) | (2,347) | 31,159 | ||
| Underlying RC profit* | 2,991 | 3,293 | 4,807 | 13,836 | 27,653 | ||
| Operating cash flow* | 9,377 | 8,747 | 13,571 | 32,039 | 40,932 | ||
| Capital expenditure* | (4,711) | (3,603) | (7,369) | (16,253) | (16,330) | ||
| Divestment and other proceeds(a) | 300 | 655 | 614 | 1,843 | 3,123 | ||
| Surplus cash flow* | 2,755 | 3,107 | 4,985 | 7,876 | 19,065 | ||
| Net issue (repurchase) of shares | (1,350) | (2,047) | (3,240) | (7,918) | (9,996) | ||
| Net debt*(b) | 20,912 | 22,324 | 21,422 | 20,912 | 21,422 | ||
| Return on average capital employed (ROACE)* (%) | 18.1% | 30.5% | |||||
| Adjusted EBITDA* | 10,568 | 10,306 | 13,100 | 43,710 | 60,747 | ||
| Adjusted EBIDA* | 34,345 | 45,695 | |||||
| Announced dividend per ordinary share (cents per share) | 7.270 | 7.270 | 6.610 | 28.420 | 24.082 | ||
| Underlying RC profit per ordinary share* (cents) | 17.77 | 19.14 | 26.44 | 79.69 | 145.63 | ||
| Underlying RC profit per ADS* (dollars) | 1.07 | 1.15 | 1.59 | 4.78 | 8.74 |
Highlights
- Resilient financial and operational performance: 2023 Operating cash flow $32.0bn; net debt reduced to $20.9bn
- Executing with discipline: Started up four major projects* in 2023, including Seagull in 4Q; Acquisition of TravelCenters of America; Agreement to acquire Lightsource bp
- Growing shareholder distributions: Dividend per ordinary share 7.270 cents per share +10% versus 4Q22; 4Q23 $1.75bn share buyback announced; committed to announcing $3.5bn share buyback for the first half of 2024
- IOC to IEC – destination is unchanged: we will deliver as a simpler and more focused company
Looking back, 2023 was a year of strong operational performance with real momentum in delivery right across the business. And as we look ahead, our destination remains unchanged – from IOC to IEC – focused on growing the value of bp. We are confident in our strategy, on delivering as a simpler, more focused and higher-value company, and committed to growing long-term value for our shareholders.
Murray Auchincloss
Chief executive officer
(a) Divestment proceeds are disposal proceeds as per the condensed group cash flow statement. See page 3 for more information on other proceeds.
(b) See Note 9 for more information.
RC profit (loss), underlying RC profit (loss), surplus cash flow, net debt, ROACE, adjusted EBITDA, adjusted EBIDA, underlying RC profit per ordinary share and underlying RC profit per ADS are non-IFRS measures. Inventory holding (gains) losses and adjusting items are non-IFRS adjustments.
- For items marked with an asterisk throughout this document, definitions are provided in the Glossary on page 34.
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Highlights
Underlying replacement cost profit* $3.0 billion
- Underlying replacement cost profit for the quarter was $3.0 billion, compared with $3.3 billion for the previous quarter. Compared to the third quarter 2023, the result reflects a strong gas marketing and trading result, higher oil realizations including the favourable impact of price-lags on Gulf of Mexico and UAE realizations, higher gas realizations, significantly lower industry refining margins albeit with a smaller decrease in realized refining margins, a weak oil trading result, higher exploration write-offs, and a higher level of refining turnaround activity. An underlying effective tax rate (ETR)* of 42% in the fourth quarter brings the full year underlying ETR to 39%.
- Reported profit for the quarter was $0.4 billion, compared with $4.9 billion for the third quarter 2023. The reported result for the fourth quarter is adjusted for inventory holding losses* of $1.2 billion (net of tax) and a net adverse impact of adjusting items* of $1.5 billion (net of tax) to derive the underlying replacement cost profit. Adjusting items pre-tax include impairments of $4.6 billion, largely as a result of changes in the group’s price and discount rate assumptions, activity phasing, economic forecasts (in particular related to the Gelsenkirchen refinery) and portfolio composition, and favourable fair value accounting effects* of $2.6 billion.
Operating cash flow* $9.4 billion and net debt* reduced to $20.9 billion
- Operating cash flow in the quarter of $9.4 billion includes a working capital* release (after adjusting for inventory holding losses, fair value accounting effects and other adjusting items) of $2.1 billion (see page 28).
- Capital expenditure* in the fourth quarter was $4.7 billion and total 2023 capital expenditure, including inorganic capital expenditure* was $16.3 billion.
- The $1.5 billion share buyback programme announced with the third quarter results was completed on 2 February 2024.
- Net debt was reduced by $1.4 billion to $20.9 billion at the end of the fourth quarter.
Further $1.75 billion share buyback announced for 4Q23; $3.5 billion for first half 2024
- A resilient dividend is bp’s first priority within its disciplined financial frame, underpinned by a cash balance point* of
around $40 per barrel Brent, $11 per barrel RMM and $3 per mmBtu Henry Hub (all 2021 real). For the fourth quarter, bp has announced a dividend per ordinary share of 7.270 cents, up 10% from the fourth quarter of 2022.
- bp is committed to maintaining a strong investment grade credit rating. Through the cycle, we are targeting to further improve our credit metrics within an ‘A’ grade credit range.
- bp continues to invest with discipline and a returns focused approach in our transition growth engines* and in our oil, gas and refining businesses. For 2024 and 2025 we expect capital expenditure of around $16 billion per annum, in line with our medium term target of $14-18 billion.
- Related to the fourth quarter results, bp intends to execute a $1.75 billion share buyback prior to reporting first quarter results. Furthermore, bp is committed to announcing $3.5 billion for the first half of 2024. At current market conditions and subject to maintaining a strong investment grade credit rating, bp plans share buybacks of at least $14 billion through 2025 as part of our commitment, on a point forward basis, to returning at least 80% of surplus cash flow* to shareholders.
- In setting the dividend per ordinary share and buyback each quarter, the board will continue to take into account factors including the cumulative level of and outlook for surplus cash flow, the cash balance point and maintaining a strong investment grade credit rating.
Continued progress in transformation to an integrated energy company
- In resilient hydrocarbons, bp announced the start-up of major project* Seagull, expected to add around 15 thousand barrels of oil equivalent per day of net production by 2025. In Gulf of Mexico bp sanctioned Argos Southwest Expansion project and expansion of the Great White development project. In Brazil, bp was awarded the Tupinambá block located in the Santos pre-salt basin.Under aim 4, we met our first goal of deploying our methane measurement approach to all our operated upstream oil and gas assets by the end of 2023.
- In convenience and mobility, bp continued to progress its convenience strategy, delivering a record convenience gross margin* for a fourth quarter, bringing full year to 9%(a) excluding TravelCenters of America, underpinned by customer offers driving stronger margin mix, continued roll-out of strategic conveniences sites, and strategic convenience partnerships. bp and Iberdrola formed a joint venture to accelerate EV charging infrastructure roll-out in Spain and Portugal, with plans to invest up to €1 billion and install 5,000 fast EV charge points by 2025 and around 11,700 by 2030.
- In low carbon energy, bp has agreed to acquire the 50.03% interest it does not already own in Lightsource bp, one of the world’s leading developers and operator of utility-scale solar and battery storage assets. This transaction is expected to complete in the second half of 2024, subject to regulatory approvals.
- In November, bp announced that it will be expanding the use of generative AI through the use of Copilot for Microsoft 365 – bp is one of the first companies globally to act as a launch partner for ‘intelligent AI assistant’.
(a) Nearest equivalent IFRS measure: Replacement cost profit (loss) before interest and tax for the customers & products segment is -52% for 2023 compared with 2022. Convenience gross margins are at constant foreign exchange – values are at end 2023 foreign exchange rates, excluding TravelCenters of America and adjusting for other portfolio changes.
bp delivered strong underlying financial performance in 2023 – we raised dividend per ordinary share by 10% and bought back $7.9 billion of shares. We remain focused on strengthening the balance sheet, with net debt falling to $20.9 billion, the lowest level over the past decade. As we look forward, we are staying disciplined, tightening our capital expenditure frame and simplifying and enhancing our share buyback guidance through 2025.
Kate Thomson Chief financial officer
