Only a few weeks ago, the BP (LSE:BP) share price hit fresh 52-week lows at 441p. Yet with the release of the full-year results for 2023 this morning (6 February), the stock has jumped over 5%. After taking a look through the full report, I can find many reasons to think that now could be a smart time to invest.
Talking through the results
Starting with the hard numbers, BP managed to improve on several areas versus 2022. The profit attributable to shareholders for 2023 was $15.2bn, a jump from the loss posted in 2022 of $2.5bn.
It was able to reduce net debt by over $0.5bn, as well as having a high level of operating cash flow of $32bn.
However, it wasn’t positive in every aspect. When you add in inventory holding losses and the impact of adjusting items, underlying replacement cost profit for the full year was $13.8bn. This is over half of the $27.7bn for the same period in 2022. This might sound like a lot of accounting jargon, but this measure of profitability is the main one BP uses.
Looking at the positives
The past year was always going to be hard to live up to after such a strong 2022. Let’s not forget, BP is heavily influenced by movements in the oil price. With the war between Russia and Ukraine kicking off in 2022, BP actually benefitted from the spike in oil prices.
For 2023, the market has been much more muted. Yet for the factors that are in the management team’s control, it did very well. The CEO noted that “2023 was a year of strong operational performance”. The business focused on cash flow, reducing debt and initiating four new major projects around the world.
This should put the firm in a much stronger position going forward, irrespective of what happens with the oil price.
Another positive is the focus on keeping shareholders happy. This is reflected with the announcement of a $3.5bn share buyback for the first half of 2024. The dividend of 7.27 cents per share is also 10% higher than in Q4 2022. This shows me the business wants to keep investors happy, which bodes well.
Weighing it all up
Of course, it’s not all sunshine and rainbows. The departure of veteran Bernard Looney last September for misconduct has damaged the reputation of the firm. With a new CFO and CEO, the strategy will be carefully scrutinised by potential investors in the short term, with any further scandals being a disaster.
Based on the results today and the shape of the business going forward, I think BP looks like an attractive purchase at current low levels. I think that once the results have been further digested, the share price could rally even further.
That’s why I believe investors should consider adding the stock to their long-term portfolio.
