Time will tell whether incoming chief executive Bernard Looney will steer BP PLC (LON:BP. into a “cleaner” future, nonetheless, on the eve of his appointment the oil major’s results highlighted progress in what it describes as “low carbon expansions”.
Looney takes over from long standing BP boss Bob Dudley – who replaced Tony Hayward in October 2010 in the wake of the Gulf of Mexico oil spill and was at the helm through the clean up and aftermath which saw the company pay out tens of billions in compensation and reparation.
Indeed, BP today confirmed that last year it made US$2.4bn of oil spill payments though it expects to pay less than US$1bn in 2020.
READ: BP shares boosted by Q4 dividend hike
Looney, who takes over following today’s results, has been running BP’s upstream division and, when news of his appointment emerged, he was described by analysts at Barclays as "the man to win over the millennials".
Analysts credited Looney with being responsible for modernising and driving BP’s digital agenda with a vision “that the industry and the company are seen as cool, clean and low carbon".
Barclays added that the oiler’s new leadership may accelerate BP’s “energy transition" while a sense of urgency over climate change evidently grows.
In that light then, a number of bullet points in BP’s Q4 update warrant closer attention.
BP today told investors that it had expanded its low-carbon businesses in 2019, notably by increasing its participation in the Lightsource solar power venture (with its stake increasing to 50%) and by establishing a Brazilian joint venture in biofuel and biopower.
The company said that the Lightsource BP business has 2 gigawatts (GW) worth of solar projects under management, plus plans for the development of an extra 10GW of capacity by the end of 2023.
Moreover, it highlighted that following a November trial the Lightsource BP business became Britain’s first company to provide a reactive power services from a solar plant at night.
Brazilian bioethanol business
In December, BP and Bunge Limited formed the BP Bunge Bioenergia joint venture vehicle which comprises 11 Brazilian biofuel sites which produce bioethanol from sugarcane.
The business yielded some 32mln metric tonnes of crushing capacity per year. Based on combined figures for 2018, the now joint operation produced some 2.2bn litres of ethanol equivalent and subsequently exported 1,200 gigawatt-hours of low-carbon biopower to Brazil’s national grid.
Q4 2019 numbers, meanwhile, showed net ethanol-equivalent production of 172mln litres which took the annual total to 796mln litres (marking an increase from 144mln and 765mln respectively).
BP noted that five major upstream projects started production last year and it made final investment decisions for a further five projects also.
It also highlighted what it described as a major fuels joint venture with Reliance Industries Limited in India.
Wind power generation, however, reduced as a result of asset divestments.
Most recently, BP became involved in a technology project aimed at improving energy efficiency for buildings management. It participated in this artificial intelligence based venture in December.
BP noted that buildings account for around a one third of the world's total energy consumption, and, such technologies may enable building managers to make informed decisions, allowing them to optimize energy use and reduce carbon emissions.
Evidently, BP is keen to communicate its efforts in its low carbon businesses – albeit as oil, gas and petrochemical operations remains the core elements of the group.
Fourth-quarter dividend boost sends BP higher
Shares moved higher in Tuesday’s deals as the market welcomed a boosted dividend as a parting gift from outgoing chief executive Bob Dudley. BP rose by 19.6p or 4.33% to trade at 471.85p each.
The dividend hike softened the blow from an otherwise expected weaker trading performance, with the oil major confirmed a slowdown in profitability in 2019.
Underlying replacement cost profit – BP’s preferred metric to show its profitability – amounted to US$2.9bn for the fourth quarter, taking the figure for the whole of 2019 to around US$10bn. As anticipated this reflected a substantial reduction when compared to the respective US$3.5bn and US$12.7bn figures for 2018.