BP generated $3.5bn in surplus cash flow in Q3, with plans to execute a $2.5bn share buyback before reporting its fourth-quarter results. This would bring its total announced share buybacks using surplus cash flow to $8.5bn. This is equivalent to 60% of 2022’s year-to-date surplus cash flow.
The Independent reported that BP’s profits were significantly higher than market analysts’ expectations as oil and gas prices have continued to soar. Michael Hewson, chief market analyst at CMC Markets UK said: “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.”
Phillips and Aramco also report high profits
At the same time, Philips 66 reported $5.4bn in earnings, compared to earnings of $3.2bn in the second quarter. The company’s adjusted earnings in the third quarter were $3.1bn, which recorded $200m less than in the second quarter.
Mark Lashier, president and CEO of Phillips 66 said: “Third-quarter results reflect a continued favorable market environment, as well as strong operating performance and improved market capture.”
Saudi Aramco joined the big profit pool with net income increasing to $42.4bn. This compares to $30.4bn over the same period in the previous year. According to Reuters, the profit beat the forecasts by 39% in the Q3 net income. The company’s free cash flow was recorded at $45bn, which was almost $16.5bn lesser than in 2021.
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Yousef Husseini, associate director for equity research at EFG Hermes said: “Given this lengthy period with elevated crude prices, which feed into solid cash flow performances as well as deleveraging of Aramco’s balance sheet, we are of the view that dividends will ultimately be increased.”
Governments respond: “More money from a windfall tax”
After these record profits, lawmakers in the US and the UK have called for more aggressive taxation of energy company profits.
Reuters reported that US President Joe Biden blamed oil and gas companies for “war profiteering” by making big profits from soaring energy prices. He also warned them of the imposition of higher taxes if they did not increase production.
On September 30, 27 energy ministers from the EU met in Brussels to discuss an EU-wide “windfall tax”. They approved proposed amendments to impose a “solidarity contribution” on producers who have benefited from soaring energy prices.
According to a BP spokesperson, the company expects to pay around $2.5bn in taxes for its British North Sea operations this year, including $800m in windfall tax. BP’s chief financial officer Murray Auchincloss told Reuters that the company paid $5bn in tax worldwide in the last quarter.
In the second quarter of 2022, BP recorded a profit of $8.45bn, a 14-year high. The company had made $3.3bn the year prior.
Bernard Looney, BP’s chief executive officer, said: “This quarter’s results reflect us continuing to perform while transforming. We remain focused on helping to solve the energy trilemma.”