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BP beats expectations amid oil price surge

by LLB Reporter
2nd Nov 21 9:49 am

BP’s results may have been better than forecast but one could argue this isn’t really a surprise given the strength of commodity prices during the period in question.

Notably there was a big difference between the underlying and reported figures, linked to accounting rules over hedging contracts affected by the unprecedented surge in natural gas prices. These made the numbers a bit of a messy affair.

The oil major did have a sweetener up its sleeve for investors, committing to an additional share buyback and effectively introducing a rather smart mechanism where it will buy back $1 billion worth of shares a quarter if oil prices are trading above $60 per barrel.

“The decision to leave the ordinary dividend unchanged suggests the company is wary of overcommitting on this front and being left exposed by further volatility in energy prices,” said AJ Bell’s Russ Mould.

“The company’s balance sheet also continued to improve for a sixth consecutive quarter which is encouraging given the need to invest in a transition away from fossil fuels.

“The winds of change are in sharp focus thanks to the COP 26 summit and political and regulatory pressure on BP is only likely to increase in the wake of events in Glasgow – even if there is no new landmark agreement.

“There is no suggestion that BP will respond to higher oil and gas prices by investing in lots of new fossil fuel projects, however the temptation to keep fields running a bit longer when they are generating such high levels of cash could creep in, particularly given the long-term nature of its net zero targets and the much shorter typical tenures of the people in charge.”

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