Summary
- Natural gas trading increases profit
- BP to buy back an extra $2.5 bln in shares
- S. President Biden has advised sector to stop “war profiteering”
BP (BP.L) more than doubled its third-quarter profit compared to a year ago to $8.15 billion and increased its share buybacks by $2.5 billion, joining peers in posting huge profits that have triggered fresh calls for energy companies to pay more taxes.
London-based BP joins peers including Exxon Mobil, Shell (SHEL.L), and TotalEnergies (TTEF.PA) which also posted huge profits last week that also saw the sector dish out a record $29 billion to shareholders.
U.S. President Joe Biden on Monday appealed to major oil companies who are earning massive profits to stop “war profiteering”, threatening to hit them with higher taxes if they don’t raise production. BP said it expects to pay roughly $2.5 billion in taxes on its British North Sea business in 2022, including $800 million in a 25% windfall tax the government implemented in May.
British UK Prime Minister Rishi Sunak’s government should consider extending that windfall tax on gas and oil firms in a fiscal statement scheduled for next month, the president of the COP26 climate summit, Alok Sharma, said on Friday.
BP paid $5 billion in tax globally in the previous quarter at a rate of 37%, Chief Financial Officer Murray Auchincloss told reporters.
Auchincloss declined to comment on Biden’s comment, but said BP is adding the number of drilling rigs in the Gulf of Mexico and shale basins to increase output. BP, which raised its dividend by 10% in the quarter, will buy back $2.5 billion of shares after repurchasing $7.6 billion so far this year. BP has pledged to use 60% of its excess cash flow for shareholder returns.
The top five Western gas and oil firms dished out to investors a record $29 billion in dividends and share buybacks in the previous quarter, based on Reuters’ calculations.
British Petroleum shares gained 0.6% by 1255 GMT, lagging a 1.4% jump in the broader European energy index (.SXEP). Michael Hewson, chief market analyst at CMC Markets UK, said:
“With the BP share price sitting near its highest levels this year, today’s Q3 numbers were always likely to be political catnip if they were anywhere near as good as Shell’s last week.”
BP’s shares have risen more than 45% in 2022, boosted by stronger oil and gas prices, but they have weakened gains by Shell and U.S. rivals Chevron and Exxon Mobil.
Gas Trading
Chief Executive Officer Bernard Looney is overseeing BP’s turn away from gas and oil to renewables and low-carbon energy in an effort to lower greenhouse gas emissions. The company wants to cut its oil and gas output by 40% by 2030.
BP’s third-quarter underlying replacement cost profit of $8.15 billion, the company’s definition of net income, in comparison to forecasts of $6 billion in a company-provided survey of analysts. Notably, BP earned a profit of $3.3 billion a year ago and hit a 14-year high of $8.45 billion in the second quarter of this year.
Its latest result was assisted by “an exceptional gas marketing and trading result” along with soaring gas prices, offsetting lower refining margins and “average” oil trading. Revenue from the gas and low energy division increased more than twofold from the second quarter.
Top U.S. LNG exporter Freeport LNG has told BP it wants to restart cargo deliveries in November following a months-long outage, Auchincloss told Reuters. BP has the biggest offtake contract from Freeport at 4.4 million tonnes per annum through 2040.
While its net debt dropped around $800 million to $22 billion, BP’s gearing, or debt-to-capital ratio, jumped to 23.1% compared to 21.9% in the second quarter.
British Petroleum said it expected global gas prices to remain volatile in the fourth quarter owing to a lack of supply into Europe after Russia reduced its pipeline supplies to the continent. Refining margins are also predicted to remain high because of sanctions on Russian crude oil and refined products, BP said.
