The new boss of BP has said he disagrees with those calling for the company to ditch plans to cut oil and gas production as he promised big new shareholder handouts on the back of a surprisingly high profit.
In his first full outing in the job Murray Auchincloss appeared to back the legacy of his predecessor Bernard Looney, who promised to make the oil major a greener company.
Mr Looney’s plan had sparked criticism from some investors, worried that it might reduce the amount of money the firm can make for them.
Last week the Financial Times reported that activist investor Bluebell Capital Partners had written to BP to ask it, among other things, to scrap plans to cut oil and gas production.
“We just disagree with them if I’m honest,” Mr Auchincloss said when speaking to analysts on Tuesday.
He added: “We are very happy with the direction of travel, and the shareholders at the top tier are happy as well.”
Investors certainly seemed happy with Mr Auchincloss’s first annual results in the top job.
BP surprised the market, presenting a set of profit figures that were higher than expected in the final quarter.
Those results partly reflected strong gas trading, offset by lower refining margins and weak oil trading.
It helped take 2023’s overall underlying replacement cost profit – the measure that analysts like to track – to 13.8 billion US dollars (£11 billion).
Although down by around half from 2022’s record profits, it is still high by historical standards.
Before last year it had been a decade since BP made that kind of profit.
BP also joined rival Shell in announcing further cash for shareholders after two years of bumper profits, with another 3.5 billion US dollars (£2.8 billion) of share buybacks for the first half of the year under plans to buy back at least 14 billion US dollars (£11.1 billion) over 2024-25.
Analysts said the share buybacks would be welcomed by the market not just because they are higher, but also because they go further into the future than what had been announced before.
BP also increased its dividend year on year by 10% to 7.27 cents a share in the fourth quarter.
Both the extra profit and the extra shareholder handouts helped BP’s shares jump by just under 6% on Tuesday.
That takes a good first step towards Mr Auchincloss’s biggest challenge as he tries to establish his new regime at BP: how to close the massive gap between the valuation of his companies and those of his rivals, especially those in the US.
BP’s share price has been lagging behind those of other oil and gas giants.
This has caused some investors, such as the earlier mentioned Bluebell Capital, to question the company’s environmental strategy.
The message from the new chief was clear on Tuesday – he wants to make more money, money that he can eventually pass on to investors.
“I have a bias for returns, I don’t necessarily have a bias for volumes of oil and gas,” he told analysts.
But as always in recent years when oil companies have reported big profits, many critics were keen to point out that BP’s multibillion-pound handouts come as those who rely on gas to keep warm are still facing historically very high bills.
Although energy prices are nowhere near as high as they were last winter, households are still paying close to double what they used to for the gas and electricity they use.
“It’s clear something is broken when big polluters like BP can see their profits fall sharply yet still rake in billions, while people across the country struggle to afford to heat their homes,” said Chiara Liguori, Oxfam GB’s senior climate justice policy adviser.
“It is people living in poverty in the UK and around the world who have contributed the least to the climate crisis who are paying the price for BP’s profits.”
Joseph Evans, researcher at the IPPR think tank, said: “It’s clear that BP and other fossil fuel giants can’t be trusted to drive the green transition: they will always prioritise their shareholders over the needs of the economy and the planet.
“What we need now is a large programme of public investment in renewables and net zero. The Government could fund that investment by taxing the excessive payouts that BP and other energy giants are handing to their shareholders.”
Mr Auchincloss took over the role of chief executive last month.
Formerly BP’s chief financial officer, he had done the job on an interim basis since September until the board decided on a permanent replacement for Mr Looney, who left after failing to fully disclose past relationships with company colleagues.