BP looking at billions in buybacks for Q4

British oil and gas supermajor BP Plc has announced plans to buy back $2,5 billion in shares after an impressive third quarter. BP delivered strong Q3 results that far exceeded market expectations, including adjusted net income of $8.15B that topped the $6.1B analyst consensus. The robust earnings are nearly 5 billion more than the company’s $3.3 billion profits just one year ago.

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BP has high energy volatility to thank for the impressive earnings, which helped boost the earnings contribution from the oil giant’s big trading unit. Indeed, adjusted Q3 profit for the gas and low carbon energy unit totaled $6.24B, more than double the $3B profit the business made in Q2.

Analysts at Jefferies now think that BP will buy back shares at an even higher clip than it has announced. The analysts note that BP has been consistently better than European peers Shell (NYSE: SHEL) and TotalEnergies (NYSE: TTE) at capturing the tighter LNG market this year.

“We believe BP will be able to set buyback at US$11bn over the next four quarters, setting BP’s shareholder remuneration yield at the highest level in the sector (12%),” Jeffries analysts have said.

But BP is not alone. Oil and gas supermajors are on course to repurchase their shares at near-record levels this year thanks to soaring oil and gas prices helping them to deliver bumper profits and boost returns for investors. According to data from Bernstein Research, the seven supermajors are poised to return $38bn to shareholders through buyback programmes this year, with investment bank RBC Capital Markets putting the total figure even higher, at $41bn.

In 2014, when oil was trading over $100/barrel, we only saw $21 billion in buybacks. This year’s figure easily outpaces the 2008 number.

But here’s another interesting thing: Big Oil’s capex and production have remained mostly flat.

Data from the U.S. Energy Information Administration (EIA) shows that Big Oil companies have mostly downshifted both capital spending and production for the second-quarter. An EIA review of 53 public U.S. gas and oil companies, responsible for about 34% of domestic production, showed a 5% decline in capital expenditures in the second-quarter vs. Q1 this year.