BP – Bumper Returns, But Possibly Too Much Too Soon

BP – Bumper Returns, But Possibly Too Much Too Soon
PIX1861 / Pixabay

BP plc (LON:BP) reported third quarter revenues of $37.9bn, up 44.2% year-on-year driven by higher oil & gas prices.

Get The Full Walter Schloss Series in PDF

Get the entire 10-part series on Walter Schloss in PDF. Save it to your desktop, read it on your tablet, or email to your colleagues.

Q3 2021 hedge fund letters, conferences and more

Mohnish Pabrai On Low-Risk Opportunities And The Recycling Sector

Mohnish PabraiIn his book, The Dhandho Investor: The Low–Risk Value Method to High Returns, Mohnish Pabrai coined an investment approach known as "Heads I win; Tails I don't lose much." Q3 2021 hedge fund letters, conferences and more The principle behind this approach was relatively simple. Pabrai explained that he was only looking for securities with Read More

Write-downs in the value of derivatives used to hedge against an oil price fall meant reported profits fell to a $2.9bn loss. However, excluding that underlying profits came in at $3.3bn, up from $86m last year.

The group announced a third quarter dividend of 5.46 cents per share, a 4% increase year-on-year. The group also announced plans to buy back $1.25bn of shares before the end of the year, following a $1.4bn buyback announced at the half year.

BP shares fell 1.4% in early trading.

BP's Third Quarter Results

Nicholas Hyett, Equity Analyst at Hargreaves Lansdown:

“BP’s third quarter results show that oil & gas remains a lucrative business. High prices have driven strong year-on-year growth in profits, and that’s being used to fund a generous $1.25bn share buyback. Coming on top of a $1.4bn buyback announced at the half year stage the group is firmly focused on shareholder returns at present.

However, you can reasonably question whether that generosity is justified. While still low by historic standards gearing rose modestly in the quarter, and the group only reported surplus cash generation of $933m (less if you discount cash from disposals). Unless the fourth quarter turns out to be even better than this it’s likely gearing will rise again.

Generosity in good times is all well and good, but that shouldn’t come at the expense of long term financial stability – particularly given the considerable spending on renewable and low carbon projects that’s likely over the coming years.”

About Hargreaves Lansdown

Over 1.67 million clients trust us with £138.0 billion (as at 30 September 2021), making us the UK’s number one platform for private investors. More than 98% of client activity is done through our digital channels and over 600,000 access our mobile app each month.

Updated on

Jacob Wolinsky is the founder of ValueWalk.com, a popular value investing and hedge fund focused investment website. Jacob worked as an equity analyst first at a micro-cap focused private equity firm, followed by a stint at a smid cap focused research shop. Jacob lives with his wife and four kids in Passaic NJ. - Email: jacob(at)valuewalk.com - Twitter username: JacobWolinsky - Full Disclosure: I do not purchase any equities anymore to avoid even the appearance of a conflict of interest and because at times I may receive grey areas of insider information. I have a few existing holdings from years ago, but I have sold off most of the equities and now only purchase mutual funds and some ETFs. I also own a few grams of Gold and Silver
Previous article FOMC Statement Will Be Closely Scrutinized
Next article Facebook, Now ‘Meta’ Will Require Users To Be Vaccinated or Show Negative COVID Test To Talk About COVID On Platform

No posts to display