By Geoffrey Smith
Investing.com -- BP (LON:BP) posted its second highest quarterly profit in its history on Tuesday and added $2.5 billion to its buyback program after another huge quarter for the U.K. oil and gas major.
Underlying replacement cost profit, the group's preferred measure of profitability, more than doubled from a year earlier to $8.15 billion, albeit that figure was down slightly from $8.45 billion three months earlier.
Analysts at Morgan Stanley noted that the figure was around one-third higher than expected, due overwhelmingly to the Gas & Low Carbon segment where BP realised an 'exceptional' gas marketing and trading result. In other divisions, results were close to consensus forecasts, they noted.
Strong cash flow due to sustained high oil and gas prices meant that the group was able to shave another $800 million from its net debt, which stood at $22 billion at the end of the quarter. That was despite a $6 billion rise in working capital requirements for funding its LNG trading business. Debt has now fallen for 10 straight quarters and is now down by nearly one-third from a year earlier, when many still doubted that BP and other majors would ever be able to shed the load they had taken on during the initial phase of the pandemic.
BP also nudged up its guidance for capital spending this year to $15.5 billion from $15 billion, reflecting assumptions that its $3.3 billion acquisition of Archaea will close this year as planned.
The company said its financial strength, coupled with the current outlook for oil prices, means it expects to be able to deliver share buybacks of around $4.0 billion per annum and have capacity for an annual increase of around 4% in the ordinary dividend through 2025.
The numbers are the latest in a series of blowout figures from the oil and gas sector, following on from Exxon Mobil (NYSE:XOM), Chevron (NYSE:CVX), TotalEnergies (EPA:TTEF), and Shell (LON:RDSa) last week. Saudi Aramco (TADAWUL:2222) also reported overnight that its profit had risen by over one-third from a year earlier to $42.4 billion in the three months through September.
Analysts at Bernstein said the numbers confirm BP as one of their top ideas in the oil and gas space, and repeated their buy recommendation with a price target of 640 pence, around one-third higher than its Monday close.