BP PLC (LSE:BP.) can afford to maintain its US$1.5 billion buyback in the current quarter, according to analysts at Barclays, who say suggestions to the contrary are incorrect.
According to the bank, BP’s policy is to pay out 60% of surplus cashflow for 2023 in the form of share buybacks.
But unlike peers such as Shell and Total, BP bases its formula post-capex which can make it volatile depending on working capital movements but has the advantage that on an annual basis net debt should continue to fall.
Add in the fact that the business is performing well and with the average oil price above $80 per barrel, a return to normalised cash tax and time lag reversal should lead to strong fourth-quarter surplus cashflow.
BP has said that at around $60 per barrel Brent and subject to the board’s discretion each quarter, it continues to expect to be able to deliver share buybacks of around US$4.0 billion per annum - or US$1 billion per quarter, notes Barclays.
Using the rule of thumb that BP provides in terms of sensitivity to the oil price - at $80 per barrel the implied buyback is US$1.5 billion a quarter.
“Our analysis and understanding of the company implies that the buyback will be at least $1.5 billion in the prevailing environment,” Barclays added.
Shares today were down 1.5% at 491.2p.