Oil giant BP launches new $1.25 billion share buyback as it warns on ‘tight’ gas market

BP has announced a new $1.25 billion share buyback and said it is on track to hand $1 billion back to investors every quarter for the foreseeable future.

The oil and gas major said in its third quarter results it would spent $1.25 billion over the next few months on buying up shares. BP “continues to expect to be able to deliver buybacks of around $1.0 billion per quarter” with oil at a minimum of $60 a barrel. Brent crude is currently trading at $84.45.

BP maintained its quarterly dividend at $5.46 and said it still has “capacity for an annual increase in the dividend per ordinary share of around 4% through 2025.”

The latest share buyback, which follows a $1.4 billion distribution in the second quarter, came as BP announced third quarter results buoyed by surging oil prices. Underlying replacement cost profit - BP’s preferred measure of performance - rose 17% to $3.3 billion. The City had been expecting a figure of $3 billion.

CEO Bernard Looney said: “This has been another good quarter for bp - our businesses are generating strong underlying earnings and cash flow while maintaining their focus on safe and reliable operations.

“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.”

Statutory profit was hit by accounting technicalities around the treatment of gas contracts. Accounting rules around how BP hedges its liquified natural gas contracts mean BP has to book any changes in the market value of these hedges as the price of gas changes. Soaring gas prices stung the business, pushing BP’s gas and low carbon energy business to a loss of $4.1 billion. That compared to a profit of $927 million in the prior quarter and City forecasts of a $1.5 billion profit.

The accounting treatment meant made a statutory loss of $2.5 billion in the third quarter. BP said the issue “is expected to unwind if prices decline and as the cargoes are delivered.”

Natural gas prices have soared to record highs in recent highs amid surging demand and a crunch on supply. The surge has pushed more than 10 domestic suppliers out of business. The latest to collapse was Bluegreen on Monday.

BP said gas markets “will remain tight during the period of peak winter demand.” That will support oil prices as more businesses switch to oil to cope with high gas prices.

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