BP plc hit its net debt target of $ 35 billion in the first quarter, ahead of plan, and is looking to return some of the excess cash to shareholders, CEO Bernard Looney said on Tuesday.
The London-based operator had received around $ 4.7 billion in proceeds from various sales of global assets by the end of March.
“This is the result of an earlier than expected delivery of the proceeds of the divestiture combined with a very good commercial performance during the first quarter,” Looney said. The strong business performance was in part “driven by trade, pricing environment and resilient operations”.
Once the net debt target is reached, management “commits to returning at least 60% of excess cash flow to shareholders through share buybacks”, as long as BP maintains a “good credit rating.” quality ”.
Asset sales followed BP’s reinvention as an “integrated power producer” of operator Big Oil. At the start of last year, just weeks before the Covid-19 pandemic was declared, BP upset the upstream and downstream stand-alone business distinctions to become a net-zero company “by 2050 or sooner. “.
The strategy has continued to evolve as BP expands its reach into alternative energies and strives to meet carbon reduction targets. The roadmap to net zero carbon was unveiled last September. This required putting certain assets on the market.
The most significant proceeds in 1Q2021 come from the sale of a 20% stake in an Oman block for $ 2.4 billion. Ineos Group, which agreed to pay $ 5 billion for BP’s global petrochemicals business last year, also made its last $ 1 billion payment earlier this year.
Other proceeds of $ 700 million resulted from BP’s sale of a 49% stake in a US subsidiary with onshore refined products and crude logistics assets. In addition, BP received $ 400 million from the sale of stakes in longtime partner and software developer Palantir Technologies Inc.
“BP now expects the proceeds from the divestiture in 2021 to be in the upper end of the previously announced range of $ 4 billion to $ 6 billion,” management said. The $ 25 billion asset sale target for the second half of 2020 to 2025 “is now underpinned by agreed or completed transactions of approximately $ 14.7 billion, with approximately $ 10 billion in proceeds received.” .
Net debt at the end of 2020 was $ 38.9 billion. It is expected to increase in the first half of 2021 partly because of severance pay.
BP’s debt is also expected to rise early this year as it pays Equinor ASA for its stakes in the partnership to seek offshore wind opportunities in the United States. The partnership initially plans to develop 4.4 GW gross with four projects. Two are being prepared to provide power to New York City, and three of the four “will have taken off,” Looney said in February.
In addition, BP has an annual pre-tax payment of $ 1.2 billion in the Gulf of Mexico oil spill relating to the Macondo well blowout in 2010, which is expected to be made in 2Q2021.
Further information on the proceeds from the sales and share buybacks is expected to be provided when BP releases its first quarter results on April 27.