BP hits $35 billion net debt target well ahead of schedule

(Reuters) – Energy group BP said on Tuesday it expects to hit its net debt target of $35 billion in the first quarter of this year, ahead of schedule and enabling it to meet its promise to buy back actions.

FILE PHOTO: BP signage is seen at a petrol station near Brighton, Britain January 30, 2021. REUTERS/Toby Melville

“This is the result of faster than expected delivery of disposal proceeds combined with a very strong commercial performance during the first quarter,” chief executive Bernard Looney said in a statement.

Shares of the London-based company, which previously expected to hit the net debt target around the fourth quarter of 2021 or the first quarter of 2022, rose 3% to 299 pence in early trading on news that she would reach the target sooner.

BP shares are now up around 16% this year, after losing 45% in 2020 as the coronavirus pandemic hit demand for oil.

BP plunged into a $5.7 billion loss last year and had $39 billion in debt at the end of 2020. It expected debt levels to rise in the first half of 2021 in due to multiple payments due.

However, in the first quarter, it generated approximately $4.7 billion of sales proceeds.

As part of Looney’s plan to shift the oil major’s focus towards low-carbon energy investments, BP aims to sell $25 billion in assets by 2025.

BP said in February it planned to start share buybacks once it hit its debt target. The company said Tuesday it will provide an update on stock buybacks with its first-quarter results on April 27.

“We estimate that at an oil price of $60/bbl, the company will repurchase approximately $2-2.5 billion of stock per year,” Berenberg analyst Henry Tarr wrote in a note.

BP also said its performance in the first quarter of 2021 was driven by trade, the pricing environment and the resilience of operations.

Brent crude rose 22.6% in the quarter on optimism about a recovery in oil demand following the rollout of COVID-19 vaccines since the start of the year.

BP said Tuesday it expects sales proceeds in 2021 to be at the high end of its current range of $4 billion to $6 billion.

Reporting by Yadarisa Shabong in Bengaluru; Editing by Shounak Dasgupta and Susan Fenton

Ann J. Cox