BP's Profits Plummet, Fossil Fuel Push Ahead
Fossil fuel production increases lead to declining profits for BP Oil Corporation
BP's earnings have taken a massive hit in the first quarter, failing to meet expectations due to divestments, weak refining margins, and some reported misfortunes in the fossil fuel market.
The oil supergiant, moving forward with Boss Murray Auchincloss's quest to boost fossil fuel production, has also seen the exit of its head of strategy, Giulia Chierchia, who played a crucial role in its once green strategy. Chierchia, reportedly under the crosshairs of a large hedge fund invested in BP, will not be replaced.
This revelation came as BP reported an underlying replacement cost (RC) profit of only $1.38 billion for the three months ending March. This figure is approximately half of what BP made last year and falls short of the $1.53 billion forecast by analysts.
The decline in earnings stemmed from the disposal of assets in Egypt and Trinidad and Tobago, where the group recently sold offshore gas fields and production facilities to Perenco T&T. BP also noted decreasing refining margins, average contributions from oil trading, and weakness in its gas marketing and trading arm.
Despite a $200 million increase in underlying RC profits from the previous quarter, BP's net debts skyrocketed by $4 billion to almost $27 billion, primarily due to lower operating cash flow.
In response to investors' demands and market volatility, BP declared a new strategy focused on expanding investments in fossil fuels while significantly reducing renewables spending. The company plans to pour $10 billion annually into oil and gas projects but trim funding on energy transition activities to between $1.5 billion and $2 billion per year.
BP aims to slash $4 to $5 billion in structural costs and lower its net debts to between $14 billion and $18 billion by the end of 2027. Auchincloss, now spearheading this new plan, has faced pressure from investors like US hedge fund Elliott Management to boost the company's profitability.
Auchincloss previously served as BP's chief financial officer until he permanently succeeded Bernard Looney as CEO in January last year. Looney stepped down after failing to disclose his past relationships with certain BP employees.
Chierchia's departure and BP's shift in strategy have raised questions about the future of the company and its commitment to green energy. BP shares suffered significant losses, with a decrease of 3.95 percent to 347.7p on Tuesday morning. Some analysts see this as a blow to the company's share price due to the underperformance in renewables.
Sources:
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- Investing in fossil fuels has become a focus for BP, with reports suggesting a significant reduction in renewables spending as part of a new strategy.
- giulia Chierchia, who played a crucial role in BP's once-green strategy, left the company and will not be replaced following pressure from a large hedge fund invested in BP.
- According to a report, BP saw a substantial decline in earnings in the first quarter, falling short of expectations and leading to increasing net debts, reportedly due to divestments, weak refining margins, and issues in the fossil fuel market.
- With BP's reported plan to pour $10 billion annually into oil and gas projects, the question of the company's commitment to green energy arises, as Chierchia's departure and BP's new strategy have raised concerns for some analysts and investors in the business.
