BP to buy back shares after third quarter profit beats forecasts

BP announced a plan to buy back shares as Britain's second-biggest oil company beat expectations for third-quarter profit.

The company's underlying replacement cost profit doubled to $1.87bn (£1.42bn) in the three months to the end of September from $933m a year earlier. Analysts' consensus forecast was for equivalent profit of $1.58bn, according to Reuters.

BP announced a quarterly dividend of 10 cents a share. The company said it would start to buy back shares in the fourth quarter to offset the dilutive effect of scrip dividends – which are paid in shares. It did not set a target for buybacks.

BP has cut costs and sold assets in the past two years to cope with a more than halving of the oil price from a peak of $110 a barrel in summer of 2014.

After falling below $30 early last year, Brent Crude has partly recovered to trade around $60 a barrel, helping BP and its bigger rival Royal Dutch Shell.

Chief financial officer Brian Gilvary said: "We have made strong progress this year in adjusting to the lower oil price environment and have now brought our finances, including the full dividend, back into organic balance at an oil price just below $50 a barrel.

"Given the momentum we see across our businesses and our confidence in the outlook for the group's finances, we will be recommencing a share buyback programme this quarter."

Oil and gas production increased 14% from a year earlier to an average of 3.6m barrels a day as BP swung to an upstream profit of $1.56bn from a loss of $224m a year earlier.

Profit from downstream business such as refining rose to $2.34bn from $1.43bn.

Excluding costs related to the Gulf of Mexico oil spill, operating cash flow was $6.6bn in the third quarter, up from $4.8bn a year earlier and more than covering capital spending and the dividend.

BP said oil and gas production in the fourth quarter would be higher than in the third quarter as it ramps up major projects.

Bob Dudley, BP's chief executive, said: "We are steadily building a track record of delivering on our plans and growing across our businesses. This quarter, three new upstream projects and the highest downstream earnings in five years, underpinned by reliable operations and disciplined spending, have generated healthy earnings and cash flow."