BP BP Plc

--BP avoided an underlying loss in the third quarter, beating market expectations

--The improved performance in July-September compared with April-June was driven by the upstream business, which benefited from a gradual recovery in oil and gas prices

--The oil giant reported progress towards its debt reduction, revised capital expenditure and divestment targets

By Jaime Llinares Taboada

BP PLC on Tuesday reported a narrowed underlying replacement cost profit for the third quarter of the year, beating market expectations.

The FTSE 100 oil giant made an underlying replacement cost profit of $86 million for the three months ended Sept. 30 compared with the company-compiled market consensus of a $120 million loss. The metric is similar to the net profit figure that U.S. oil companies use but strips out one-off items. BP had reported a $2.25 billion underlying RC profit a year earlier.

BP's net loss for the period came in at $450 million, narrowing from a $749 million loss a year earlier.

A weak oil market continued to hurt the British company in the third quarter, with average prices of $43 a barrel severely squeezing margins during the period.

However compared with the second quarter, the company's financial performance benefited from the absence of significant exploration write-offs, and recovering oil and gas prices and demand. The upstream division swung to a $878 million underlying RC profit before interest and tax in the third quarter compared with a $8.5 billion loss in April to June.

BP said that the gradual recovery in oil demand looks set to continue, driven by consumption in Asia, and pointed out that the International Energy Agency forecasts an increase of around six million barrels for 2021. In addition, OPEC+ production cuts are helping at balancing supply and demand.

As for gas, BP said that pricing support is coming from the supply side, with U.S. production expected to continue declining, which would prompt stronger prices in Europe and Asia.

However BP warned that the outlook for its refining margin remains challenging, as inventories remain filled at record high levels and the pandemic continues to weigh on gasoline and jet fuel consumption.

BP's board declared a dividend of 5.25 cents a share for the period, in line with the shareholder payment reset announced this summer. It is down from 10.25 cents a year earlier.

Net debt was reduced to $40.4 billion as at Sept. 30, down $500 million from the beginning of the quarter. BP intends to cut net debt to $35 billion before resuming share buybacks.

"The underlying business performance in the quarter remained resilient and we made substantial progress in strengthening our balance sheet. In the quarter, net debt reduced to around $40 billion and our cash balance point was around $42 Brent," Chief Financial Officer Murray Auchincloss said.

The group continues to progress its cost-saving measures, with capital expenditure on track for the revised full-year target of around $12 billion, and a headcount reduction of around 10,000 positions --the majority of which will leave the company by the end of 2020.

As for divestments, BP said that it is approaching half the $25 billion proceeds target by 2025, including completed and agreed sales. The $5 billion sale of the petrochemical business is expected to close by the end of 2020.

Shares at 0800 GMT were up 5.35 pence, or 2.7%, at 205.35 pence.

Write to Jaime Llinares Taboada at jaime.llinares@wsj.com; @JaimeLlinaresT

(END) Dow Jones Newswires

October 27, 2020 04:23 ET (08:23 GMT)

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