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(Alliance News) - BP PLC on Tuesday unveiled plans to buyback USD1.25 billion worth of shares, as its third quarter earnings were lifted by an increase in commodity prices.
By its preferred measure, the oil major's third quarter profit surged year-on-year. However, it posted a loss on a reported basis, after suffering a hefty one-off hit from a sharp hike in forward gas prices, BP revealed.
Not including what the FTSE 100 firm labelled a "significant adverse fair value accounting effects", underlying replacement cost profit for the third quarter of 2021 rose to USD3.32 billion from just USD86 million year-on-year.
Total revenue increased 44% year-on-year to USD37.87 billion from USD26.26 billion. Compared to two years earlier, so before the onset of the pandemic, revenue was down 45%, though underlying RC profit increased 47%.
However, BP's loss attributable to shareholders for the quarter was USD2.54 billion, widening from USD450 million a year ago.
BP posted a USD6.1 billion hit from accounting effects. This was "primarily due to the exceptional increase in forward gas prices towards the end of the quarter".
BP explained: "Under IFRS, reported earnings include the mark-to-market value of the hedges used to risk-manage liquefied natural gas contracts, but not of the LNG contracts themselves. This mismatch at the end of the third quarter is expected to unwind if prices decline and as the cargoes are delivered. The underlying result is adjusted to remove this mismatch."
The oil major swung to a third quarter pretax loss of USD495 million, from a USD150 million profit a year earlier.
"This has been another good quarter for BP - our businesses are generating strong underlying earnings and cash flow while maintaining their focus on safe and reliable operations. Rising commodity prices certainly helped," said Chief Executive Bernard Looney.
BP plans a further share buyback worth USD1.25 billion. It expects to complete this before announcing its fourth-quarter figures, and will outline plans for the final tranche of buybacks for 2021 surplus cash flow when releasing the results.
It said: "On average, based on BP's current forecasts, at around USD60 per barrel Brent and subject to the board's discretion each quarter, BP continues to expect to be able to deliver buybacks of around USD1.0 billion per quarter and have capacity for an annual increase in the dividend per ordinary share of around 4% through 2025."
Brent oil was trading at USD85.06 on Tuesday morning, the North Sea benchmark up 75% since the start of 2021.
BP's third quarter payout increased 4.0% to 5.46 cents per share from 5.25 cents.
Looking to the fourth quarter, BP expects a quarter-on-quarter upturn in its Upstream output. For the full year, however, it expects production at the unit to weaken.
The company is also looking to the latest OPEC+ decision on production levels. The cartel meets on Thursday.
"OPEC+ decision making on production levels continues to be a key factor in oil prices and market rebalancing," BP said.
The company also predicted gas markets "will remain tight during the period of peak winter demand".
BP shares were 2.0% lower at 349.96 pence each in London on Tuesday morning.
By Eric Cunha; ericcunha@alliancenews.com
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