ENERGY giant BP reported a steep fall in profits for 2023, but you won’t find shareholders complaining.

The oil and gas giant saw underlying replacement cost profit, its preferred benchmark, tumble by 50% to $13.8 billion (£11bn), as the benefits from the spike in commodity prices that immediately followed Russia’s invasion of Ukraine in February 2022 began to wear off.

The company’s profits of nearly $3bn for the fourth quarter were better than the market forecast, but that was not the key reason why the company’s share price was up by more than 5% today. It was the prospect of hefty returns to shareholders which cheered the market.

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BP announced a buyback worth $1.75bn for the fourth quarter and said that would be followed by the repurchase of $3.5bn of shares in the first half of the year, adding that it expects to complete buybacks worth at least $14bn over 2024-2025.

The buybacks appeared to shift the focus away from BP’s net-zero strategy, which has seen it simultaneously criticised by green campaigners for not going far and fast enough, and investors, on the other hand, who believe it should be doing more to maximise hydrocarbons.

BP itself has shown it is in no hurry to walk away from areas such as the North Sea, where it brought the Seagull field off the east of Aberdeen into production in 2023, though chief executive Murray Auchincloss told Reuters news agency today that the company was still committed to reducing oil production by 25%, from 2019 levels, by 2030. His predecessor, Bernard Looney, has previously targeted reducing oil production by 40% by 2030, before watering down that target amid the upheaval that followed Russia’s invasion of Ukraine.

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Michael Hewson, chief market analyst at CMC Markets UK, seemed to sum up the situation well, stating: “BP appears to be sticking with the current strategy and focusing on pacifying shareholders with throwing extra cash their way with further buybacks.

“While this is likely to be welcomed in the short term by shareholders, the reluctance to invest more money in longer term high-margin projects is likely to be a concern if BP wants to maintain these levels of pay-outs to shareholders.”