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BP Expands Share Buybacks As Oil Price Rally Boosts Profit

BP (NYSE: BP) reported on Tuesday profits above analyst expectations and committed to additional share repurchases by early 2022 as the rally in oil and gas prices raised cash flow and underlying profit in the third quarter.

BP booked an underlying replacement cost profit – the metric closest to net profit – of $3.3 billion for Q3, up from $2.8 billion for the previous quarter, as a result of higher oil and gas prices and refining margins, and strong trading results. Analyst estimates pointed to a profit of $3.1 billion for the quarter.

The company's operating cash flow stood at $6.0 billion for the third quarter, and $17.5 billion for the nine months, compared with $5.2 billion and $9.9 billion for the same periods of 2020.

Considering the cash flow and the outlook for cash flows, BP plans a further buyback of $1.25 billion before announcing its fourth-quarter 2021 results early next year.

"On average, based on bp's current forecasts, at around $60 per barrel Brent and subject to the board's discretion each quarter, bp continues to expect to be able to deliver buybacks of around $1.0 billion per quarter and have the capacity for an annual increase in the dividend per ordinary share of around 4% through 2025," the company said.

"Rising commodity prices certainly helped, but I am most pleased that quarter by quarter, we're doing what we said we would - delivering significant cash to strengthen our finances, grow distributions to shareholders and invest in our strategic transformation. This is what we mean by performing while transforming," CEO Bernard Looney said.

BP's shares were down 2% in London and 2.4% pre-market in New York, "partly because questions remain about the company's proposed pivot away from fossil fuels," Michael Hewson, chief market analyst at CMC Markets, wrote, commenting on BP's Q3 performance. 

"The company can talk about "performing while transforming" all it likes, but it needs to prove to shareholders and the market that it can transition to renewables without hammering its margins, and the jury is likely to remain out on that in the near term," Hewson said.

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"With energy prices at high levels, the company is in a sweet spot for cash flow and profit potential. It needs to capitalise on this opportunity," the analyst noted.

By Tsvetana Paraskova for Oilprice.com

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