London's FTSE 100 energy behemoth BP has revealed a dramatic 70% collapse in annual profits, sending shockwaves through the City as oil prices continue their downward trajectory from previous wartime highs.
Profit Plunge Reflects Cooling Market
The stark figures show underlying replacement cost profit – BP's preferred performance measure – tumbling to $13.8 billion (£10.9 billion) for 2023, a dramatic fall from the previous year's $27.7 billion windfall when oil prices surged following Russia's invasion of Ukraine.
The fourth quarter proved particularly challenging, with profits nearly halving to nearly $3 billion, significantly missing analyst expectations of over $4 billion.
Shareholder Returns Remain Priority
Despite the profit collapse, BP maintained its commitment to shareholder returns, announcing a further $1.75 billion in share buybacks. However, the pace has slowed from previous quarters, reflecting the company's more cautious approach amid market uncertainty.
"BP's looking to reassure investors that it's still very much open for business," commented one City analyst. "The buybacks continue, but there's definitely a more defensive posture emerging."
Market Pressures Mount
The energy giant faces multiple headwinds:
- Brent crude trading around $80 per barrel, well below 2022 peaks
- Weak gas marketing and trading results
- Operational challenges including refinery maintenance
- Growing pressure to transition toward renewable energy
BP's new chief executive, Murray Auchincloss, who recently took permanent leadership, emphasised the company's "delivery over discovery" approach, focusing on executing existing strategies rather than announcing new initiatives.
Industry-Wide Trend
BP isn't alone in facing profitability challenges. Rival Shell recently reported its own significant profit decline, while US counterparts Exxon and Chevron have also seen earnings soften as the exceptional market conditions of 2022 normalise.
The results highlight the ongoing volatility in global energy markets and the delicate balancing act facing traditional oil giants as they navigate both short-term market pressures and the longer-term transition to cleaner energy sources.
