BP (NYSE:BP)(GB:BP) announced a record profit for 2022. The British oil and gas company delivered an underlying replacement cost profit (a proxy used for net profit) of $27.65 billion in 2022, up about 116% year-over-year. The surge in profitability led the energy company to enhance its shareholders’ returns through higher dividends and share buybacks.
The company raised its dividend by 21% in 2022. Moreover, it announced $11.25 billion in share buybacks. Furthermore, BP lowered its net debt by $9.2 billion and strengthened its balance sheet.
As for the fourth quarter, BP posted an underlying replacement cost profit of $4.8 billion. However, its earnings per ADS (American Depositary Share) of $1.59 fell short of analysts’ estimate of $1.66.
BP highlighted that lower Gas Marketing and Trading activities, and a decline in oil and gas price realizations, weighed on Q4 earnings compared to Q3. However, its earnings per ADS improved by 29.3% year-over-year.
Looking ahead, BP expects Chinese demand, lower inventory, and uncertainty around Russian exports to support oil prices. Moreover, it expects the refining margin to remain elevated in Q1. On the production front, the company expects the reported and underlying upstream production to remain flat compared with 2022. Meanwhile, the effective tax rate is projected to be around 40%.
With a surplus cash flow of $19.29 billion at the end of 2022, BP is well-positioned to enhance its shareholders’ returns further through share repurchases and dividend payments.
What is the Price Target for BP?
BP stock has an average price target of $41.75, implying an upside potential of 19.83%. Meanwhile, it has received two Buys and three Holds for a consensus rating of Moderate Buy. However, with hedge funds accumulating its stock, BP carries an Outperform Smart Score of eight on TipRanks.
