BP Stock Spikes as New CEO Entices Investors with Share Repurchases

Bloomberg -- After boosting share buybacks, BP Plc rose to a two-month high as its new CEO attempted to win over investors wary of its clean-energy plan.

The London-based oil and gas firm will repurchase $1.75 billion of shares each quarter in the first half of the year, up from $1.5 billion in the preceding three months, as fourth-quarter performance exceeded expectations. In a further attempt to calm shareholders who have challenged its low-carbon initiatives, the business said it will sustain this repurchase rate until next year.

“We’ve got real confidence,” CEO Murray Auchincloss, appointed last month, told Bloomberg on Tuesday. "And that confidence in growth has allowed us to issue new buyback guidance." The stock surged 6% to 481.15 pence at 9:09 a.m. in London.

After Exxon Mobil Corp., Chevron Corp., and Shell Plc beat estimates in the fourth quarter, BP follows. After the abrupt resignation of former CEO Bernard Looney, rumors that it was a takeover target, and calls from activist investor Bluebell Capital Partners to shift spending from renewables to oil and gas, its earnings announcement caps a turbulent few months.

BP earned $2.99 billion in the three months ended Dec. 31, down from $4.81 billion a year earlier and $3.29 billion in the previous quarter. This beat the $2.76 billion average expectation.

Auchincloss said the company's net debt, $20.9 billion, is the lowest in a decade, driving the repurchase. BP still intends to lower that percentage, but the reduction allows it to repay 80% of surplus cash to shareholders, up from 60%.

Auchincloss said this modification addressed “a bit of feedback we received that sometimes people are a bit uncertain as to what the buyback is going to be”.

BP's earnings beat was “relatively low quality” but the repurchase increase was favorable, Redburn analysts wrote. Auchincloss limited capital spending to return more cash to owners. BP plans to invest $16 billion this year and next, up from $14 billion to $18 billion.

Auchincloss said the tighter spending will be due to “less room” for acquisitions after Archaea Energy and TravelCenters of America.