BP launches $3.5bn share buyback after profit jump

BP plans to buy back up to $3.5bn of its shares over the next three months after reporting a forecast-busting second-quarter profit that was almost treble that for the same period in 2021.

The UK major's underlying replacement cost profit came in at $8.5bn, compared with $2.8bn in the second quarter of 2021. This measure of profit — which excludes impairment charges, other one-off items and inventory valuation effects — was also 35.3pc greater than for the preceding quarter. The result beat analysts' estimates, the consensus being that underlying RC earnings for the quarter would come in at $6.7bn.

Cash flow from operations more than doubled to $10.9bn from $5.4bn in second-quarter 2021, with surplus cash flow — after capital spending and divestments — coming in at $6.59bn, compared with $695mn in the year-earlier period. Consequently, BP's net debt fell for the ninth successive quarter to reach $22.8bn by the end of June, compared with $27.5bn three months earlier, with gearing dropping to 21.9pc from 25.9pc.

The company intends to continue its policy of boosting shareholder remuneration with share repurchases, launching a new $3.5bn share buyback programme today that is due to be completed by its next quarterly results. During the second quarter, the company executed buybacks that amounted to $2.3bn of its shares.

The firm also announced a 10pc increase in its quarterly dividend to 6.006¢ per share.

BP attributed its bumper figures to strong realised refining margins, a continuing exceptional performance in its oil trading activities and higher liquids realisations.

The company's average refining marker margin more than trebled to $45.5/bl compared with the $13.7/bl it recorded for the second quarter of 2021, and was also much greater than the January-March figure of $18.9/bl. Refining availability remained high at 93.9pc, compared with 95pc during the first quarter.

Oil and gas production for April-June rose to 2.2mn b/d of oil equivalent (boe/d) from 2.1mn boe/d a year earlier. BP saw an average realised price for its liquids of $100.94/bl compared with $60.69/bl and $83.80/bl in second-quarter 2021 and the first quarter of this year, respectively. Its average realised price for gas in Europe leapt to $16.06/000 ft³ in comparison with $8.94/000 ft³ in second-quarter 2021 but was down on the $33.77/000 ft³ it achieved in January-March this year. In the US, its achieved gas prices averaged $6.28/000 ft³ in the quarter, compared with $3.03/000 ft³ a year earlier.

BP said that it expects oil prices to remain elevated during the current quarter because of the ongoing disruption to Russian supply, reduced levels of spare capacity and inventory levels significantly below the five-year average. It sees gas prices remaining high and volatile because of the lack of supply to Europe. The company expects third quarter upstream production to remain broadly flat compared with the second quarter.

The company sees no change to the amount it has budgeted for capital spending in 2022, with capex expected to come in at $14bn-15bn.