BP hits $35B net debt target before schedule due to trading and high performance

bp net debt

The British oil major, bp, announced this Tuesday it expects to hit its $35 billion net debt target by the end of the first quarter of this year; at least one year sooner than expected, due to high performance on its energy trading wing.

Firstly, this accomplishment will pave the way for the company to deliver on its promise to buy back shares. The company said on February it had planned to start share buybacks once it reached its debt target. Bp said it would provide and update on the matter by the end of this month, around April 27.

Secondly, the company said it had expected to reach its net debt target by the fourth quarter of 2021, or maybe by the first quarter of 2022; however, it reached it at least one year before.

Consequently, as soon as the news broke, bp’s shares rose as much as 3% to 299 pence on the early trading sessions, according to Reuters. Now, bp’s shares are up 16%, after plunging 45% during 2020, when the coronavirus pandemic crashed the energy market.

Moreover, the company expected that in the second half of 2021 its debt would rise due to several payments due; however, in the first quarter of this year it generated $4,7 billion from sale proceeds. According to Reuters, this high performance is also due to energy trading.

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Net debt target accomplished after high performance in trading

In addition, as we have reported previously, energy trading has been a major strategy for oil companies to shield themselves from the economic recession. During 2020, the company made $4 billion out of that business.

Indeed, the company’s performance is a “result of earlier than anticipated delivery of disposal proceeds; combined with very strong business performance during the first quarter.” Said CEO Bernard Looney in a statement.

He also said that energy trading, as well as resilient operations and a more equilibrated oil price environment were crucial factors for the recovery and net debt accomplishment.

On the other hand, the company expects to have sale proceeds during this year at the top end of its existing $4 billion to $6 billion range. Finally, the company’s shifting strategy from an oil focus, to a low carbon energy portfolio will be backed by a $25 billion assets sales by 2025.

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