Q1 Results: BP Hands Ten Times as Much to Shareholders as They Spend on “Low Carbon” Investment

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Q1 Results: BP Hands Ten Times as Much to Shareholders as They Spend on “Low Carbon” Investment

Executive Summary

Today, energy giant BP reported near-record underlying replacement cost profits of $5 bn (£4 bn) in its 2023 Q1 results, its second highest ever profit for Q1. Over the course of last year, the company distributed a total of $14.75 bn (£11.75 bn) to shareholders. This vast windfall represents a direct transfer of income from ordinary bill payers to the company’s shareholders.

[.img-caption]Figure 1 BP shareholder payouts were 10 times their “low carbon” investment in Q1[.img-caption]

Today’s figures highlight that BP’s low-carbon investment falls far below the company’s investment in fossil fuels and the sums it is distributing to shareholders. Analysis by Common Wealth Senior Analyst Chris Hayes found that in Q1 2023 BP spent ten times as much on shareholder payouts (dividends and share buybacks combined) as their capital expenditure on their "low carbon" segment, for which investment fell compared to the previous quarter. Total shareholder payouts exceeded total cash capital expenditure for yet another quarter. Importantly, another $1.75 bn in buybacks has been scheduled for Q2 2023.

Previous research from Common Wealth found that together BP and Shell had distributed £147 bn to shareholders between 2010 and 2020.

While defenders of the scale of shareholder payouts have claimed UK pensioners are among the main beneficiaries of these windfalls, analysis conducted by Common Wealth in 2022 found that the UK’s major pension funds own only 0.2% of BP and Shell, underlining the minimal impact a steeper windfall tax would have on pensions. By another measure, Common Wealth estimate that Shell and BP equities together comprise 0.25% of UK defined benefit pension fund portfolios.

Further investment in fossil fuels goes against the recommendations of global organisations including the International Energy Agency, who argue that any new oil and gas development is incompatible with climate goals.

The surge in the profits of the energy giants — and their failure to direct this windfall to investment in renewable sources — raises troubling questions about whether the for-profit corporation is an appropriate vehicle to deliver a timely and effective transition to a clean energy system.

[.quote][.quote-text]BP’s continued huge profits show yet again the reality of our economy: while a cost of living crisis grinds on, the energy giants are profiting at our expense. A bumper quarter of £4 billion in profits has triggered a new round of share buybacks, transferring £1.4 billion to shareholders. The energy crisis is really a massive upward transfer of income from ordinary people and business to wealthy investors. In response, we need a proper windfall and the building out of a public energy system.[.quote-text][.quotee]Mathew Lawrence, Director of Common Wealth[.quotee][.quote] 

[.img-caption][.img-caption-header]Figure 2 Shareholder payouts were 10x “low carbon” capital expenditure in Q1 2023[.img-caption-header][.img-caption-text]BP: Capital expenditure vs shareholder payouts, 2019-Q1 2023, $bn[.img-caption-text][.img-caption-text]Note: BP acquired renewable natural gas firm Achaea Energy for $3.03 bn in Q4 2022[.img-caption-text][.img-caption]

[.img-caption][.img-caption-header]Figure 3 BP paid more to shareholders than they invested in Q1 2023[.img-caption-header][.img-caption-text]BP: Dividends and buybacks vs total capital expenditure, 2019-Q1 2023, $bn[.img-caption-text][.img-caption]

[.img-caption][.img-caption-header]Figure 4 BP has committed to spending 60% of surplus cash flow on share buybacks[.img-caption-header][.img-caption-text]BP: Shareholder payouts by type, 2019-Q1 2023 $bn[.img-caption-text][.img-caption]

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Q1 Results: BP Hands Ten Times as Much to Shareholders as They Spend on “Low Carbon” Investment