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* Profit more than triples from Q1 2020 to $2.6 bln
* Net debt drops below $35 billion
* BP to buy back $500 mln in shares in second quarter
* GRAPHIC: BP profits https://tmsnrt.rs/2PpqAX1
(Adds background on Texas storm, CEO dividend comment, updates
share price)
By Ron Bousso and Shadia Nasralla
LONDON, April 27 (Reuters) - BP's profit more than
tripled to $2.6 billion in the first quarter thanks to stronger
oil prices and bumper revenue from natural gas trading, paving
the way for the energy company to start buying back its shares.
The jump in profits from a year earlier comes as BP says it
expects oil demand to recover in 2021 due to strong growth in
the United States and China as COVID-19 vaccination programmes
accelerate.
In a sign of growing confidence in the economic recovery and
its operations following a year of cutting costs, headcount and
its dividend, BP said it will buy back $500 million of shares in
the second quarter to offset dilution from an employee share
distribution programme.
Helping it deliver on its earlier promise to buy back
shares, net debt fell below the company's $35 billion target
sooner than expected, dropping $5.6 billion from the end of
December to $33.3 billion at the end of March, chiefly due to
around $4.8 billion worth of disposals and higher oil prices
.
"We estimate a further $1.5-2 billion in buybacks is
possible this year," Bernstein analysts, who have an outperform
rating on BP stock, said in a note.
The company said it would provide an update on the third
quarter buyback programme later this year.
On a conference call, Chief Executive Bernard Looney said it
was possible that cash distribution, or dividend, levels could
return to pre-pandemic levels over the course of next year.
BP's shares had given up earlier gains of around 3% by 0954
GMT, having risen around 17% year-to-date.
However, the company is the weakest performer among the oil
majors, with shares still around a third lower than their
pre-pandemic level as investors fret over its energy transition
strategy.
As part of Looney's plan to shift focus to low carbon
investments, BP aims to sell $25 billion of assets by 2025.
From a target of 50 gigawatts of renewables capacity by
2030, it currently has 1.6 GW of installed capacity, has given
the financial go-ahead to a further 3.3 GW and has an additional
pipeline of around 14 GW.
But out of its $13 billion investment budget this year, BP
has said it plans to spend $9 billion on oil and gas.
First-quarter underlying replacement cost profit, the
company's definition of net income, rose to $2.6 billion, far
exceeding forecasts of $1.64 billion in a company-provided
survey of analysts.
That was also up from a $110 million profit in the fourth
quarter of 2020 and topped the pre-pandemic profit of $2.4
billion posted in the first quarter of 2019.
"This result was driven by an exceptional gas marketing and
trading performance, significantly higher oil prices and higher
refining margins," BP said.
A freak cold snap in Texas in February resulted in very high
gas price volatility.
Cashflow from operations rose to its highest since Q4 2019
at $6.1 billion and underlying profit at its gas unit soared to
$1.7 billion from $2 million in the previous quarter.
BP expects global oil inventories, which swelled as the
coronavirus pandemic hit fuel demand, to fall to historic levels
by the end of 2021.
(Reporting by Ron Bousso and Shadia Nasralla; editing by Louise
Heavens, Kirsten Donovan)
