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BP Delivers Another Strong Quarter; Makes Strategic Progress, Bumps Buyback

Allen Good, CFA Sector Strategist

Analyst Note

| Allen Good, CFA |

BP delivered another strong quarter thanks to high commodity prices while demonstrating the continued execution of its long-term transition strategy. Adjusted earnings soared to $3.3 billion from $86 million a year ago largely on higher commodity prices.  Operating cash flow during the quarter increased to $6.0 billion from $5.2 billion a year ago but includes a $1.8 billion working capital build compared with a $1.2 billion release last year. Net debt continued to fall to $32.0 billion from $32.7 billon at the end of the second quarter. After repurchasing $1.4 billion since the second-quarter earnings announcement, BP announced it plans to repurchase another $1.25 billion before the announcement of fourth-quarter results. The amount is greater than BP’s actual surplus cash generation, but management is confident in the company’s execution and outlook given the current environment. It continues to expect to repurchase $1 billion in shares per quarter assuming $60/bbl. Our fair value estimate and moat rating are unchanged.

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Company Profile

Business Description

BP is an integrated oil and gas company that explores for, produces, and refines oil around the world. In 2019, it produced 2.1 million barrels of liquids and 7.9 billion cubic feet of natural gas per day, including volumes from its 20% ownership interest in Rosneft. At year-end 2020, reserves stood at 18.0 billion barrels of oil equivalent, 59% of which are liquids. The company operates refineries with a capacity of 1.9 million barrels of oil per day.

1 St James's Square
London, SW1Y 4PD, United Kingdom
T +44 2074964000
Sector Energy
Industry Oil & Gas Integrated
Most Recent Earnings Sep 30, 2021
Fiscal Year End Dec 31, 2021
Stock Type
Employees 63,827