Outlook better for BP as profits surge

● Oil giant sees Q3 earnings double as production output jumps 14 per cent

BP yesterday signalled its growing confidence in the oil market by announcing it is resuming share buybacks in the wake of strong third quarter profits.

The move comes amid a brighter outlook for global oil giants after Brent crude lifted above $60 a barrel for the first time in two years last week. That is more than double the $27 seen in January 2016 although still well down on the $115 reached in summer 2014.

BP said underlying replace‑ ment cost (RC) profit – the market’s preferred measure – rose to $1.9 billion (£1.44bn) over the three‑month period, up from $684 million for the same quarter last year.

Shares in the firm rose more than 3 per cent, hit‑ ting a seven‑year high. The announcement of the share buyback programme was described by Hargreaves Lansdown analyst Nicholas Hyett as the “first bone for investors” from the improve‑ ments being seen across the business.

BP added that oil and gas production during the third

0 The Valhall project in the Norwegian North Sea has helped lift output

BOB DUDLEY, CEO quarter rose to an average of 3.6 million barrels of oil per dayafteritlaunchedanumber of new projects.

Group chief executive Bob Dudley said: “We are steadily buildingatrackrecordofdeliv‑ eringonourplansandgrowing across our businesses.

“This quarter, three new upstream projects and the highest downstream earn‑ ings in five years, underpinned by reliable operations and disciplined spending, have generated healthy earnings and cash flow. There is still room for further improve‑ ment and we will keep striv‑ ing to increase sustainable free cash flow and distribu‑ tions to shareholders.”

The oil giant is currently hunting for a new chairman after it announced in October that Carl‑henric Svanberg would step down next year.

His appointment came shortly before the Deepwater Horizon disaster in April 2010 that cost 11 lives.

While the lion’s share of the mammoth costs are behind the firm, BP said Gulf of Mexico oil spill payments came in at $600m in the third quarter. It said full‑year pay‑ ments linked to the disaster would be around $5.5bn.

Hargreaves Lansdown’s Hyett said: “BP has spent the past seven years addressing big problems, with first the Gulf of Mexico disaster and then the oil price crash throw‑ ing the group into disarray. Those headwinds are finally fading into the history books.

“Gulf payments are still soak‑ ing up mind‑boggling quan‑ tities of cash, but are final‑ ly starting to recede. New oil fields are starting to come online, supporting cash generation from the group’s upstream business.

“Meanwhile, the down‑ stream business, which has been BP’S rock throughout much of the oil downturn, continues to deliver excellent results.”

Mike van Dulken, head of research at Accendo Markets, said the share buyback pro‑ gramme had been well‑ received.

“It suggests management are even more comfortable with current oil prices, consider‑ ing cash generation more than capable of covering commit‑ mentstobothgrowthandcap‑ ital returns. It’s also suggestive of even more water under the bridge from what has been a very expensive legal process.”

“We are steadily building a track record of delivering on our plans and growing across our businesses. There is still room for further improvement”