British oil giant BP records underlying profit of $8.15 billion

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British oil giant BP more than doubled its third-quarter profit from a year earlier to $8.15 billion, lifted by strong natural gas trading, as it expanded its share buybacks by $2.5 billion amid rising calls to increase taxes on the energy sector.

The London-based company joins rivals including Shell, Exxon Mobil and TotalEnergies which also reported bumper profits last week that also saw the sector pay out a record $29 billion to shareholders.

US President Joe Biden on Monday called on major oil companies who are bringing in big profits to stop “war profiteering”, threatening to hit them with higher taxes if they don’t increase production.

BP said it expects to pay around $2.5 billion in taxes for its British North Sea business this year, including $800 million in a windfall tax.

The company paid $5 billion in tax around the world in the quarter at a rate of 37 per cent, Chief Financial Officer Murray Auchincloss told Reuters.

Auchincloss would not comment on Biden’s comment, but said BP is increasing the number of drilling rigs in the Gulf of Mexico and shale basins to boost output.

BP, which increased its dividend by 10 per cent in the quarter, will buy back $2.5 billion of shares after repurchasing $7.6 billion so far this year. BP has committed to using 60 per cent of its excess cashflow for shareholder returns.

BP shares were down 0.25 per cent by 1215 GMT, lagging a 1.2 per cent rise in the broader European energy index.

“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,” said Michael Hewson, chief market analyst at CMC Markets UK.

BP’s shares have gained more than 45 per cent this year, buoyed by stronger oil and gas prices, but they have trailed gains by Shell and US rivals Exxon Mobil and Chevron.

The top five Western oil and gas giants paid out to investors a record $29 billion in dividends and share buybacks in the third quarter, according to Reuters calculations.

Chief Executive Officer Bernard Looney is leading BP’s pivot away from oil and gas to renewables and low-carbon energy in an effort to slash greenhouse gas emissions. The company aims to reduce its oil and gas output by 40 per cent by 2030.

BP’s third-quarter underlying replacement cost profit of $8.15 billion, the company’s definition of net income, compared with forecasts of a $6 billion profit in a company-provided survey of analysts.

BP made a profit of $3.3 billion a year earlier and a 14-year high profit of $8.45 billion in the second quarter of 2022.

Its latest result was helped by “an exceptional gas marketing and trading result” as well as higher gas prices, offsetting weaker refining margins and “average” oil trading.

Earning from the gas and low energy division more than doubled from the second quarter.

Top US LNG exporter Freeport LNG has informed BP it expects to resume cargo deliveries this month following a months-long outage, Auchincloss told Reuters.

BP holds the largest offtake contract from Freeport at 4.4 million tonnes per annum through 2040.

While its net debt fell around $800 million to $22 billion, BP’s gearing, or debt-to-capital ratio, rose to 23.1 per cent from 21.9 per cent in the second quarter.

BP said it expected global gas prices to remain volatile in the forth quarter due to a lack of supply into Europe after Russia slashed its pipeline deliveries to the continent.

Refining margins are also expected to remain high due to sanctions on Russian crude oil and refined products, BP said.

BP said Tuesday that underlying third-quarter profit more than doubled on high commodity prices after key energy producer Russia’s invasion of Ukraine but logged a net loss on accounting charges.

Replacement cost profit soared to $8.2 billion in the three months to September, the British energy major announced.

That compared with $3.3 billion a year earlier and outstripped market expectations of $6.1 billion.

Yet profits were weaker than the second quarter due to a dip in oil prices.

London-listed BP, flush with cash, also revealed a $2.5-billion share buyback but its stock slid in morning deals.

Energy markets remain elevated due to Russia’s war in Ukraine, which has sent British household fuel bills rocketing — but helped generate massive profits across the industry.

Energy prices also leapt on strong demand after nations lifted Covid pandemic lockdowns.

Runaway profits have heightened calls for Britain to massively enlarge its windfall tax to help cushion the impact of a cost-of-living crisis largely sparked by sky-high electricity and gas bills.

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