(Alliance News) - BP PLC on Tuesday launched a fresh share buyback, despite a drop in first-quarter profit due to lower oil and gas prices and weaker fuels margins.

Shares in BP were down 0.9% to 505.82 pence each in London early Tuesday.

The London-based oil major said first-quarter underlying replacement cost profit was down 45% at USD2.72 billion from USD4.96 billion a year prior. Compared to the fourth quarter, underlying RC profit was down a more modest 9.0% from USD2.99 billion.

Underlying RC profit per share was 16.24 US cents compared to 27.74 cents a year ago, and 17.77 cents in the previous quarter.

Reported RC profit was USD1.61 billion in the first quarter, down more than 80% from USD8.67 billion a year ago, though up from USD1.52 billion in the fourth quarter of 2023.

Compared with the fourth quarter of last year, the result reflects lower oil and gas realizations, the impacts of the Whiting refinery outage, and significantly weaker fuels margin, BP said.

This was partially offset by significantly lower level of turnaround activity, a strong oil trading result, and higher realized refining margins, the company added.

Total first quarter revenue was down 13% to USD48.88 billion from USD56.18 billion a year earlier, and down 6.3% from USD52.14 billion in the fourth quarter.

First quarter upstream production was 2.4 million barrels of oil equivalent per day, up 2.1% from a year earlier.

BP announced a new USD1.75 billion share buyback and an unchanged target of USD3.5 billion in buybacks for the first half of 2024. This follows a USD1.75 billion buyback announced alongside fourth quarter results, which was completed on May 3.

Along with the buyback, BP declared a first quarter dividend of 7.27 cents, unchanged from the fourth quarter, and up 10% from 6.61 cents a year ago.

Operating cash flow was USD5.01 billion, down 34% from USD7.62 billion a year ago, and down 47% from USD9.38 billion in the previous quarter.

BP said it was aiming for at least USD2 billion of cash cost savings by the end of 2026 relative to 2023.

The reduction is expected to result from cost-saving measures across BP's business underpinned by digital transformation, supply chain efficiencies and global capability hubs. Some of these cost savings may have associated restructuring charges, BP said.

Chief Executive Officer Murray Auchincloss said: "We've delivered another resilient quarter financially and continued to make progress on our strategy. Oil production was up and our ACE platform in the Caspian is now producing. We are simplifying and reducing complexity across BP and plan to deliver at least USD2 billion of cash cost savings by the end of 2026 through high grading our portfolio, digital transformation, supply chain efficiencies and global capability hubs."

Looking ahead, BP expects second quarter 2024 reported upstream production to be slightly lower compared with first-quarter 2024.

In its customers business, BP expects seasonally higher volumes and fuels margin to remain sensitive to movements in the cost of supply.

In products, BP expects realized margins to be impacted by narrower North American heavy crude oil differentials. In addition, BP expects the absence of the first quarter plant-wide power outage at the Whiting refinery to be partly offset by a higher level of turnaround activity.

For 2024, BP continues to expect both reported and underlying upstream production to be slightly higher compared with 2023.

Within this, BP continues to expect underlying production from oil production & operations to be higher and production from gas & low carbon energy to be lower.

BP continues to expect capital expenditure for 2024 to be around USD16 billion, but now expects the phasing to be split broadly evenly between the first half and the second half.

BP said it expect Gulf of Mexico oil spill payments for the year to be around USD1.2 billion pre-tax including USD1.1 billion pre-tax paid during the second quarter.

By Jeremy Cutler, Alliance News reporter

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