BP's 2024 Results: Profits Down but Strategic Progress in Energy Transition
Why we think this is neutral
BP's 2024 results present a mixed picture. While profits have declined significantly compared to the previous year, the company has demonstrated resilience in a challenging market environment. The maintenance of strong cash flow, continued shareholder returns, and progress in strategic initiatives, particularly in low carbon energy, offset the negative impact of lower refining margins and weaker trading results. The company's ability to achieve cost reductions and advance major projects in this context is commendable, indicating a forward-looking approach despite current headwinds.
Key Points
- Underlying RC profit decreased to $8.9 billion from $13.8 billion in 2023
- Operating cash flow remained strong at $27.3 billion
- Dividend increased by 10%, with $7 billion in share buybacks delivered
- Upstream production increased by 2% to 2,358 mboe/d
- $0.8 billion structural cost reduction achieved in 2024
- Net debt stood at $23.0 billion, up from $20.9 billion at end of 2023
- Significant progress in low carbon projects, including offshore wind and hydrogen initiatives
- Refining margins and gas trading results were weaker compared to 2023
- Impairment charges of $5.1 billion recorded, including Gelsenkirchen refinery
- Capital expenditure maintained at $16.2 billion, in line with 2023
Summary
BP's 2024 financial results reflect a challenging year with underlying replacement cost profit falling to $8.9 billion from $13.8 billion in 2023. Despite this, the company demonstrated financial resilience with strong operating cash flow of $27.3 billion and maintained its commitment to shareholder returns, increasing the dividend by 10%. Operationally, BP achieved a 2% increase in upstream production and made significant strides in its strategic transition, including progress in offshore wind, hydrogen, and carbon capture projects. The company also delivered on its efficiency targets, achieving $0.8 billion in structural cost reductions. Looking ahead, BP faces continued market challenges but is positioning itself for future growth through its low carbon initiatives and portfolio reshaping efforts. The upcoming Capital Markets Update on February 26th is expected to provide further insights into the company's strategic direction.