- Oil and gas major reports higher than expected third-quarter profits
- Company now expects to raise more than $4 billion from asset sales in 2025
- Quarterly dividend higher than a year ago
- New $750 million share buyback announced
“The company is not getting a huge amount of help from oil or gas prices, so BP’s management will be pleased to deliver a set of third-quarter results that beats analysts’ forecasts and outlines another year-on-year increase in the dividend as well as a new share buyback,” says AJ Bell investment director Russ Mould.
“BP is now on track to return almost $9.5 billion to its shareholders via dividends and buybacks in 2025, or more than 10% of its stock market capitalisation.
“That may catch the eye of income and cash-hungry investors, but it partly also reflects the degree of scepticism with which equity markets view the company and its strategy. The shares are no higher than they were in 1997, and investors are demanding that lofty ‘cash yield’ as compensation for the risks that they feel still come with the business, including long-term demand for hydrocarbons, the timing of a shift toward more renewable sources of energy and whether BP can therefore extract maximum value from its assets.
Source: LSEG Refinitiv data
“A good set of third-quarter figures still represents a step in the correct direction, though, and BP continues to churn out a pretty consistent level of profits, even as oil and gas prices remain fairly flaccid.
Source: Company accounts
“Shareholders will be more pleased to see improvements in cash flow, helped by cost efficiencies and restrained capital expenditure, and how management is supplementing this with proceeds from asset disposals. Management now expects to raise more than $4 billion from asset sales this year, up from a prior goal of $3.5 billion.
Source: Company accounts
“Any boost from higher oil and gas prices would still be welcome, though, as the $750 million buyback for the fourth quarter does represent a slowdown from the run rate seen between 2021 and 2024.
Source: Company accounts
“That lower run rate does reflect the impact of oil and gas prices, and also how chief executive Murray Auchincloss and chief financial officer Kate Thomson wish to buttress the balance sheet. Increased use of leases mean that BP’s total net liabilities are creeping higher again, and management will not wish to leave itself open to criticism that the company is funding its dividends and buybacks through borrowing rather than cash generated from the daily operations and, if needs be, asset sales.”
Source: Company accounts. Net debt defined as borrowings plus pension liabilities plus leases minus cash minus pension assets.
