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BP promised to trim its costs by $2bn by the end of 2026 after its first-quarter profit fell by more than expected.
“We are saying at least $2bn, we think it is a good start,” Murray Auchincloss, who took over from Bernard Looney as the oil major’s chief executive in January, told the Financial Times on Tuesday.
He noted that BP’s “controllable” cash costs of about $22.6bn last year had risen 8 per cent compared with 2019, despite a previous round of cuts.
He said savings would be made “in all parts of our business” and would come from focusing BP’s portfolio of assets, taking out waste in the supply chain, digital transformation and relying more on “hubs” for its IT and accounting services.
Auchincloss spoke as the FTSE 100 group announced that first-quarter underlying profit came in at $2.7bn, compared with a consensus forecast of $2.9bn. The company said it had paid a higher tax rate, and that while oil and gas trading were strong, prices had fallen substantially from a year earlier. Net debt increased to $24bn from $20.9bn in the last quarter.
While Auchincloss, previously the company’s chief financial officer, has stuck to his predecessor’s broad vision for BP to become a clean energy company, he has emphasised the importance of shareholder returns as he tries to close the valuation gap with rivals.
“We remain committed to the strategy,” he said. “We just have to be pragmatic. We need to deliver the returns we promised to the market, otherwise we won’t move projects forward.”
BP’s shareholders are expecting the company to further soften its climate-related oil and gas production targets. BP currently aims to cut production of oil and gas to the equivalent of 2mn barrels a day by the end of 2030.
“We have 2025 targets and we have 2030 aims,” said Auchincloss. “Aims need to be converted to targets, and then they become firm targets. I am focused on returns and cash flow, not on volume targets. Production could be higher, production could be lower,” he said.
Returning more cash to shareholders was a common theme throughout Big Oil’s first-quarter earnings, which saw Shell, Chevron and TotalEnergies beat expectations and ExxonMobil and BP fall short.
BP said it would spend another $1.75bn on share buybacks in the second quarter and Auchincloss said the company remained committed to returning “at least $14bn” to shareholders by the end of 2025, as long as oil and gas prices remained stable.
Auchincloss said that moving BP’s listing from London was “not on our agenda”. Its rival, Shell, is facing some shareholder pressure to move its listing from London to New York, in a bid to close the valuation gap with US rivals.
Meanwhile, BP’s pension schemes had a $7.8bn surplus in the first quarter of 2024. Yet the company has decided not to increase pay outs by more than the 5 per cent cap. Auchincloss said this was because the pay outs were already more than the increase in salaries that BP employees would receive in 2024, although he said he appreciated pension fund members had been hit by the UK’s cost of living crisis.
BP shares were broadly flat in early trading in London at 509p.