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On Tuesday, BP reported that its profits halved in the first quarter, coinciding with the announcement of the departure of the executive responsible for the company’s strategy during its unsuccessful shift towards renewable energy.
A decline in gas marketing and trading was mainly behind a 49% drop in adjusted profit, which fell to $1.38 billion for the first quarter—lower than analysts’ estimated $1.64 billion.
Cash flow issues during the quarter led to a $4 billion increase in net debt since December, bringing the total to $27 billion.
This year, BP also scrapped its goal of becoming a leader in renewable energy. The company stated that Giulia Chierchia, the head of strategy, who was one of the brains behind this plan, will leave in June without being replaced.
Chierchia was absent during BP’s announcement in February about returning to oil and gas to boost its struggling share price. She had recently drawn the attention of activist investor Elliott Management, which is urging BP to make deeper spending cuts and aims for the company to generate $20 billion in free cash flow by 2027.
BP is the first of the major energy companies to disclose its earnings for the first quarter, with competitors Shell, TotalEnergies, and ExxonMobil expected to release their reports later this week.
The largest oil companies are bracing for a challenging year as dropping crude prices pressure their profits. BP is perceived to have the highest vulnerability to oil price fluctuations, which recently hit a four-year low, primarily due to its fragile financial position.
The company’s current strategy relies on an oil price assumption of $71.5 per barrel this year, while Brent crude was trading at $65 per barrel on Tuesday morning.
BP did not disclose its response to the lower prices but announced a $500 million reduction in capital spending for the year. CEO Murray Auchincloss stated that the company would “keep an eye on market volatility and adapt accordingly,” while staying focused on its plans.
The company confirmed it now aims to sell between $3 billion and $4 billion in assets this year and is optimistic that it can lower its debt to a range of $14 billion to $18 billion by the end of 2027.
In spite of its challenges, BP announced it would buy back $750 million in shares, down from the previous quarter’s $1.75 billion, which is at the lower end of analysts’ forecasts.
BP’s shares dropped by 3.8% in early trading on Tuesday and have seen a decline of over 13.5% this year, while Shell has experienced a roughly 3.5% decline and Total has seen a 3% gain.
