(Bloomberg) -- BP Plc slowed the pace of share buybacks as lower energy prices and annual bonus payouts trimmed its cash flow.

While the London-based giant’s profit beat estimates thanks to a strong performance by its oil and gas traders, the surplus cash flow it uses to boost investor returns shrank by about 40%. BP said it will repurchase a further $1.75 billion of shares, $1 billion less than in the prior period. 

Even as Big Oil’s earnings decline from the record levels seen in 2022, they remain strong by historical standards and companies are still generating a lot of extra cash. Nevertheless, BP’s shares fell as much as 5.6% as the buyback came in smaller than expected. 

BP’s cash flow took a hit from a $1.4 billion “surprise” build in working capital, a financial term that measures liquid assets and liabilities, Barclays Plc’s Lydia Rainforth wrote in a note. Most of that was related to annual bonuses paid to employees who helped deliver record profits last year, BP said.

The first-quarter results and guidance for the rest of the year “suggests that free-cash-flow momentum is likely to be weaker from here, although this could improve later,” RBC’s Biraj Borkhataria said in a note.

Shares of the company were 5.2% lower at 506 pence as of 11:41 a.m. in London.

BP’s first-quarter adjusted net income was $4.96 billion, down from $6.25 billion a year earlier but comfortably beating the average analyst estimate of $4.28 billion. BP said the figures reflected an “exceptional” performance in gas marketing and “very strong” results from oil trading, which offset the impact of lower energy prices and refining margins.

Traders are typically paid annual bonuses based on a proportion of their profits. While BP discloses few details about earnings from its division that buys and sells crude, fuels, natural gas and other hydrocarbons, for much of 2022 it reported a strong performance from the unit amid high price volatility.

The $1.4 billion change in first-quarter working capital “principally had to do with bonus payments,” BP’s Chief Financial Officer Murray Auchincloss said on a call with analysts. “That’s the majority of that build.”

“As we had expected, softening prices translated into a lower second-quarter buyback tranche at $1.75 billion ($2.75 billion in the first quarter). Declining net debt and maintained capex guidance are further positives, though we flag that earnings strength may not be repeatable given the significant trading contribution in the first. — Will Hares, BI global energy analyst.

BP is executing a strategy laid out earlier this year to pump more oil and gas than previously planned in the near term, while also increasing investment in low-carbon energy. In April, the company brought a major new oil platform online in the Gulf of Mexico and has said it will consider deals to boost fossil fuel production further. 

That’s angering activists and some investors, but it appeals to other shareholders who want to see higher cash returns from an industry that had struggled for several years. BP shares have risen about 30% over the past year.

The company said it plans to keep growing returns to investors by buying back about $4 billion of shares and increasing the dividend by 4% annually, assuming capital expenditure is held at the lower end of the $14 billion to $18 billion range and Brent crude trades near $60 a barrel. 

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