BP Beat 3Q Profit Expectations Amid Upstream Business Recovery -- Update
--BP avoided an underlying loss in the third quarter, beating
--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
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
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
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
Write to Jaime Llinares Taboada at firstname.lastname@example.org;
(END) Dow Jones Newswires
October 27, 2020 04:23 ET (08:23 GMT)
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