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London Markets: Not even a billion more in buybacks can help BP, as stock weighs down the FTSE 100

A profit beat and $1.25 billion more stock buybacks were not enough to lift shares of BP PLC on Tuesday as it acted like a deadweight on London’s main index, alongside banking giant Standard Chartered.

Shares of BP
BP,
-3.32%

BP,
-4.03%

fell 2.4%, with rival Royal Dutch Shell
RDS.A,
-1.99%

RDSA,
-1.79%

down 1.5%. The energy giant said its underlying replacement cost profit rose to $3.32 billion in the three months ending September, from $2.80 billion in the previous quarter and $86 million a year ago. That number beat analysts average forecast of $3.06 billion.

BP said it continues to expect a decline in reported full-year upstream production, and that it’s planning an additional $1.25 billion share buyback ahead of fourth-quarter results, as high energy prices boosted its third quarter.

The company “is a cash machine at these sort of (oil and gas) prices and the business is running very well,” Chief Executive Officer Bernard Looney told Reuters.

But judging by the fallout from shares, investors seem to lack confidence in his plan to cut oil and gas production 40% by 2030, said Michael Hewson, chief market analyst at CMC Markets, in a note to clients.

The “wind has been blowing toward a renewables transition for several years now and yet BP has continued to pay huge dividends without investing significant amounts for the inevitable move away from fossil fuels, as climate change moves up the political agenda,” he said.

The earnings came as global and business leaders gathered at a climate-change summit in Glasgow.

“The company can talk about “Performing while Transforming” all it likes but it needs to prove to shareholders and the markets as a whole that it can transition to renewables in a way that doesn’t hammer its margins, and the jury is likely to remain out on that.

Dragged lower by BP, the FTSE 100 index
UKX,
-0.59%

dropped 0.5% to 7,248.12. Mining stocks were also under pressure, with heavyweights Rio Tinto
RIO,
-2.76%

RIO,
-3.03%

and Glencore
GLEN,
-3.31%

down 3.6% and 4%, respectively. Shares of fellow miner Ferrexpro
FXPO,
-7.30%

slid 7% after Credit Suisse cut it to neutral.

Standard Chartered
STAN,
-8.36%

was another standout decliner, with shares of the bank dropping 8%, even as it reported a 44% gain in underlying pretax profit to $1.075 billion for the third quarter, as operating income returned to growth and credit impairments eased further.

After shares soared 13% in October, “the bank was on a hiding to nothing really, some investors being bound to engage in profit-taking regardless of the actual figures and forecast,” said  Chris Beauchamp, chief market analyst at IG.

The bank said that it expects credit impairment to remain low in the fourth quarter, and that its income for 2021 will be similar to last year’s on a constant currency basis. From next year, the bank says income growth should return to the 5%-7% guidance range.

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