ii view: BP favours Gulf settlement over share buybacks

Third-quarter results to 30 September

• Adjusted profit of $8.46 billion, up from $5.73 billion in Q2
• Earnings per share of 54.37 US cents, up from 36.92 cents in Q2
• Group net debt of $13.87 billion, down from $26 billion a year ago
• Quarterly dividend of 8.66 US cents per share, unchanged from Q2

Chief executive Meg O’Neill said:

“These are dynamic times with volatility and disruption to trade flows continuing to define energy markets. We have now delivered our net debt and structural cost reductions targets and have line of sight on the remaining two of the four primary financial targets we set ourselves for 2027.

“Last week we announced an important step as we agreed with the State of Louisiana to accelerate the delivery of our Deepwater Horizon settlement commitments. Our intent is now to prioritize the use of excess cashflow to address our remaining Deepwater Horizon liabilities in full.”

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ii round-up:

BP (LSE:BP.) today detailed above forecast quarterly profits, although the oil major’s focus has tilted toward Deepwater Horizon settlement liabilities rather than share buybacks.

Third-quarter adjusted profit of $8.46 billion is up from $5.73 billion in the second quarter, helped by strong trading and refining operations. Earnings per share of 54.37 US cents comfortably exceeded analyst estimates of 46.39 cents.

Shares in the FTSE 100 company rose 1.5% in UK trading having come into this latest news up around 44% so far in 2026. That’s similar to rival Shell (LSE:SHEL). The FTSE 100 index is up 8% year-to-date.

Strong cashflows have helped slash group net debt to $13.87 billion from $26 billion a year ago, below management’s prior target of $14-18 billion.  

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Under relatively new CEO Meg O'Neill, BP’s strategic focus has been to strengthen the balance sheet, simplify the group’s business portfolio and invest with greater discipline.

A quarterly dividend of 8.66 US cents per share declared, and payable to eligible shareholders on 18 December, is unchanged from the second quarter.

Broker UBS reiterated its ‘buy’ stance on BP shares post the results, with a price target of 700p per share.

BP is scheduled to provide a strategy update on 15 December.

ii view:

Started in 1901, BP today operates in more than 60 countries with most of its exploration and production coming from the US, North Africa, the Middle East and Latin America. Downstream operations include refining and the Castrol oil business. Activities for the Supply, Trading and Shipping (STS) division, include the trading of around four billion barrels of crude oil and five billion barrels of refined products annually.

For investors, a new focus to reduce Deepwater Horizon settlement liabilities continues to see share buybacks halted. The effect of elevated energy prices on inflation may yet result in further interest rate rises, potentially dampening energy demand. Climate change concerns have not gone away, while the previous major stake sale in the Castrol business reduces diversity of assets and profit generating centres.

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On the upside, the tailwind of strong energy prices is now allowing BP to focus on reducing obligations of over $40 billion. More than 10 exploration discovery successes in 2025 underline the group’s emphasis on improved operational performance. Both business and geographical diversity persist, while an ongoing dividend payment and dividend yield of around 4% are not to be ignored.

In all, and while the 40%-plus gain in the share price year-to-date offers room for caution, the CEO’s emphasis on strengthening the oil major for the long term is likely to see investors remain firmly supportive.

Positives:

• Focus on increased efficiency
• Attractive dividend yield (not guaranteed)

Negatives:

• Climate change concerns persist
• Uncertain economic outlook

The average rating of stock market analysts:

Cautious buy