BP increases buybacks as profits rise on stronger prices, trade

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(Bloomberg) – BP Plc has said it will repurchase an additional $ 1.25 billion in shares, using the proceeds of soaring energy prices to entice investors who have become disenchanted with oil and the gas.

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The last of the Western world’s supermajors to report third-quarter earnings, BP followed in the footsteps of its peers by announcing a sharp increase in earnings from the previous year. After years of poor performance, the industry is spending most of that extra cash on buying back stocks and paying dividends.

This pleases shareholders increasingly concerned about climate change, but the lack of investment in new production has contributed to the current global energy crisis.

“The business is doing very well and is very price dependent,” CEO Bernard Looney said in an interview with Bloomberg TV on Tuesday. “More and more investors like the plans and the strategy that we have. “

BP’s adjusted third-quarter net profit was $ 3.32 billion, up from $ 86 million a year earlier. The London-based company topped analysts’ average estimate by $ 3.01 billion. Cash flow from operations showed a more modest increase, from $ 5.98 billion to $ 5.98 billion a year earlier.

The company has already completed the $ 1.4 billion share buyback announced in its second quarter results. The additional $ 1.25 billion share buyback will take place ahead of the release of fourth quarter results, the statement said. If Brent crude stays above $ 60 a barrel, BP has said it should be able to repurchase $ 4 billion of shares and increase the dividend by 4% per year.

BP exceeded expectations due to a “very strong” result in the gas market, RBC Capital Markets analyst Biraj Borkhataria said in a note. While the next tranche of the buyback is less than the $ 1.5 billion anticipated by RBC, the company should be able to increase the share buyback rate next year, he said.

Shares of the company fell 0.3% to 356 pence at 8:03 am in London.

BP used some of its extra cash to pay off debts, which had swelled in early 2020 as prices plummeted due to the global pandemic. At the end of the three-month period, the company’s net debt was $ 31.97 billion, compared to $ 32.71 billion at the end of the second quarter.

Unlike its Big Oil peers, BP is not moving when it comes to capital spending. It will stick to a budget of $ 13 billion next year, unchanged from its previous forecast. The company remains “very focused on the discipline of capital,” Looney said.

The French companies TotalEnergies SE, Exxon Mobil Corp. and Chevron Corp. have all pledged to increase their investments next year, albeit from historically low levels. Royal Dutch Shell Plc has also hinted that its capital budget will increase next year, with its net debt falling well below a self-imposed threshold of $ 65 billion.

(Updates with the share price in the seventh paragraph.)

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