BP POSTED a 30 per cent drop in third-quarter profit to US$2.3 billion – the lowest in almost four years – weighed down by weaker refining margins and oil trading results, it said on Tuesday (Oct 29).
However, the fall in profit from a year earlier was smaller than expected. This comes amid a slowdown in global economic activity and oil demand, particularly in China.
It also raises pressure on chief executive officer Murray Auchincloss, who has vowed to boost BP’s performance as investors raise concerns over its energy transition strategy.
“We have made significant progress since we laid out our six priorities earlier this year to make BP simpler, more focused and higher value,” Auchincloss said.
BP shares, which opened 0.8 per cent lower on Tuesday, have underperformed those of its rivals so far this year, with investors questioning the company’s ability to generate profits.
Shares of the company fell 15 per cent, a steeper decline than the 2 per cent fall for Shell. Meanwhile, Exxon Mobil’s counter posted a 19 per cent gain.
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Auchincloss, who took up the job in January, has vowed to focus on high-margin businesses, distancing himself from predecessor Bernard Looney’s strategy to rapidly expand renewables and reduce oil and gas output.
Reuters reported earlier this month, citing sources, that BP abandoned a flagship target to cut oil and gas output by 2030. The company has also scaled back its low-carbon hydrogen investments and plans to sell its US onshore wind operations.
Sources added that BP is considering selling a minority stake in its offshore wind business.
Auchincloss said on Tuesday that the company has the potential to grow oil and gas output until the end of the decade, while it also continues to make high-grade investments in low-carbon and renewables.
Sharp reversal
BP’s underlying replacement cost profit, the company’s definition of net income, reached about US$2.3 billion in the third quarter.
It exceeded forecasts of US$2.1 billion in a company-provided survey of analysts, but was down from US$2.8 billion in the previous quarter and US$3.3 billion a year earlier.
The results were the weakest since the fourth quarter of 2020, when profits collapsed during the pandemic.
BP’s oil and gas production rose by 3 per cent from a year earlier to about 2.4 million barrels of oil equivalent per day, offsetting a drop in refining margins and weaker oil trading.
Higher natural gas prices further boosted earnings, although petrol trading was average in the quarter, BP said.
Global oil refiners are seeing profitability drop to multi-year lows in a sharp reversal for an industry that had enjoyed surging post-pandemic returns, underlining the extent of the current demand slowdown.
The energy giant maintained its dividend at US$0.08 a share, after raising it in the previous quarter. It also kept the rate of its share buyback programme at about US$1.8 billion over the next three months, and committed to do so again for the following three months.
Net debt rose to US$24.3 billion from US$22.6 billion at the end of June, mostly because of the around US$2.5 billion in debt assumed following last week’s completion of the acquisition of the outstanding 50 per cent in its solar joint venture Lightsource BP.
Its debt-to-market capitalisation ratio, known as gearing, rose to 23.3 per cent from 20.3 per cent a year earlier. REUTERS
