(Reuters) – BP (BP.L) on Tuesday reported a record profit of $28 billion for 2022 while boosting its dividend in a sign of confidence as it sharply raised overall spending plans but scaled back ambitions to reduce oil and gas output by 2030.
The blockbuster profit follows similar reports from rivals Shell (SHEL.L), Exxon Mobil (XOM.N) and Chevron (CVX.N) last week after energy prices surged in the wake of Russia’s invasion of Ukraine. The bumper earnings have prompted new calls to further tax the sector as households struggle to pay their energy bills.
Chief Executive Bernard Looney took the helm three years ago with an ambitious plan to pivot BP away from oil and gas towards renewables and low-carbon energy in an effort to slash greenhouse gas emissions.
In a strategy update, BP said it will increase annual spending by $1 billion for both renewables and oil and gas with a sharper focus on developing low-carbon biofuels and hydrogen.
But it scaled back plans to cut oil output, now saying it aims to produce 2 million barrels of oil equivalent per day by 2030, down 25% from 2019 levels compared with previous plans for a 40% cut.
While many investors backed Looney’s strategy, BP’s shares have been the worst performers among top Western energy companies since he took office, remaining largely flat compared with a 17% gain for Shell and a nearly 80% gain in Exxon shares.
BP’s fourth-quarter underlying replacement cost profit, the company’s definition of net income, reached $4.8 billion, narrowly missing a $5 billion forecast in a company-provided survey of analysts.
That compared with $4 billion a year earlier and $8.2 billion in the third quarter of 2022.
The results were impacted by weaker gas trading activity after an “exceptional” third quarter, higher refinery maintenance and lower oil and gas prices.
But for the year, BP’s $27.6 billion profit exceeded its previous record of $26 billion in 2008.
BP shares were 3.6% higher by 0910 GMT.
BP boosted its dividend by 10% to 6.61 cents per share. It halved its dividend to 5.25 cents in July 2020 for the first time in a decade in the wake of the pandemic.
The company also announced plans to repurchase $2.75 billion worth of shares over the next three months after buying $11.7 billion in 2022.
BP reiterated plans to divide its spending over the period equally on the oil and gas business and its energy transition businesses, upping the total budget to up to $18 billion from a previously guided upper range of $16 billion.
The company’s transition businesses include bioenergy, convenience retail stores, electric vehicle charging, renewables and hydrogen, accounting for around 30% of the current budget compared with 3% in 2019.
BP said it expects returns of upwards of 15% from its bioenergy business and its combined electric vehicle charging and convenience store businesses, while looking for double-digit returns on hydrogen and 6-8% on renewables, excluding the effect of debt.
It aims to translate this into a core profit from the transition businesses of $3 billion-$4 billion in 2025 and $10 billion-$12 billion by 2030, out of total group earnings before interest, tax, depreciation and amortisation (EBITDA) of $51 billion-$56 billion targeted by the end of the period.
BP also wants to increase its focus on renewable natural gas having last year acquired U.S. producer Archaea Energy for $4.1 billion, and it has also set a target to produce 0.5 million-0.7 million tonnes a year of low-carbon hydrogen to initially supply its own refineries.