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BP Shares Edged Lower on Q3 Results Amid a $2.2 Billion Loss

Simon Mugo trader
Updated 1 Nov 2022

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Key points:

  • BP shares edged lower on Q3 results as calls for a windfall tax increase.
  • The company reported a $2.2 billion loss despite generating $8.3 billion.
  • BP plans to return $2.5 billion to its shareholders despite high oil prices.

The BP plc (LON: BP) share price edged lower after reporting a $2.2 billion loss during the third quarter of 2022 compared to the $9.3 billion profit recorded in Q2 this year. The loss was driven by inventory holding losses of $2.2 billion and adverse fair value accounting adjustments of $10.1 billion. The losses were partially offset by the $2.0 billion gain from the set-up of Azule Energy.

Also read: The Best Oil Stocks To Buy.

The energy giant continued generating significant cash flows worth $8.3 billion during the quarter after adjusting inventory holding costs and the adverse effects of fair value accounting worth $6.2 billion. The expected high future prices of liquid natural gas (LNG) drove the adverse effects.

BP noted that its working capital building since last year, driven by the high oil and gas prices, should cushion it in the upcoming quarters. The company expects to release up to $7 billion from its working capital reserves in H2 2023 and 2024.

The company had capital expenditures of $3.2 billion in Q3 and expected its CAPEX figures to rise to $15.5 billion by the year’s end if the Archea Energy acquisition is completed. In addition, the energy major bought back shares worth $2.9 billion and completed the $3.5 billion share buyback program announced in its second-quarter results.

The energy company is also committed to transitioning away from hydrocarbons, and its acquisition of Archea Energy, a US-based biogas company, is a significant step in the right direction.

BP and other energy giants have been criticised by governments led by US President Joe Biden for reaping massive profits from the record-high oil prices and not returning some of their profits to their customers in the form of lower oil prices.

However, BP and other leading oil and gas companies have defended their businesses by paying enough taxes and reinvesting their profits into discovering and developing new assets. The oil giants continue to oppose calls for a windfall tax on their profits, which are gaining momentum in various parts of the world, including the UK, Europe and the US.

*This is not investment advice.

BP share price.

BP share price 01-11-2022
Source: Tradingview

The BP share price edged lower after releasing its Q3 2022 earnings report. What’s next?

Simon has over six years of professional trading experience across FX, commodities and equities. He has a strong passion for financial markets and is particularly focused on price action trading