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BP Poised to Restart Buybacks After Reaching Debt Goal Early

(Bloomberg) —

BP Plc said it already achieved its $35 billion net-debt target, reaching the threshold at which it has said it can restart share buybacks about a year earlier than expected.The news reflects an accelerated pace of asset sales and improved business performance, with BP’s trading division capitalizing on dramatic moves in energy markets. It marks a potential turning point following a tumultuous year for the industry, in which fuel sales and refining margins were hammered by the impact of the coronavirus pandemic.

So far this year, a “very strong” business performance driven by trading, prices and “resilient operations” has meant earlier achievement of the debt target, the London-based oil giant said Tuesday in a statement. On reaching that goal, “BP is committed to returning at least 60% of surplus cash flow to shareholders by way of share buybacks.”

The news will be a boon to investors, many of whom had seen competitor Royal Dutch Shell Plc as being ahead of the game in returning money to shareholders, having slightly raised its dividend only two quarters after it was slashed.

BP shares rose 2.9% to 298.25 pence at the open in London.

During the quarter through March, BP received around $4.7 billion of disposal proceeds, and now expects such proceeds in 2021 to be at the top end of the previously announced $4 billion to $6 billion range, it said.

The company is seeking to sell $25 billion of assets by 2025. It has divested a stake in a large Omani gas development, is looking to offload platforms in the North Sea, and made $400 million from the sale of an interest in data firm Palantir Technologies Inc.

BP is among a number of oil majors and independent commodity trading houses to profit from the large swings in prices during the pandemic. The company doesn’t break down how much money its trading unit makes, but Chief Executive Officer Bernard Looney has said the division will be key in boosting returns from investments in less-profitable renewables.

BP’s net debt at the end of 2020 was $38.9 billion. It said at the time that the figure would likely increase in the first half of 2021. In February, BP said it expected to meet its $35 billion debt target between the fourth quarter of 2021 and the first quarter of 2022.

There’ll be a further update on debt and buyback plans at BP’s first-quarter results on April 27.

(Updates with asset-sale program in seventh paragraph.)

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