BP Swings to a Loss On Weaker Oil Prices -- WSJ
October 30 2019 - 3:02AM
Dow Jones News
By Sarah McFarlane and Giulia Petroni
This article is being republished as part of our daily
reproduction of WSJ.com articles that also appeared in the U.S.
print edition of The Wall Street Journal (October 30, 2019).
BP PLC said it swung to a loss in third-quarter earnings
resulting from a divestment-related charge and lower earnings in
its exploration and production business.
The London-based energy giant Tuesday posted a replacement-cost
loss -- a metric similar to the net income figure that U.S. oil
companies report -- of $351 million for the three months ended
Sept. 30, compared with a profit of $3.09 billion in the
year-earlier period.
Stripping out the one-off items, BP's results exceeded analyst
expectations, with the underlying replacement-cost profit at $2.25
billion, above a company-compiled consensus of 24 brokers'
estimates forecasting $1.73 billion. Still, the result was well
below the same period last year when its underlying
replacement-cost profit was $3.84 billion.
BP's results exceeded market expectations as a result of
better-than-expected downstream and Rosneft contributions, said
Bernstein analyst Oswald Clint. BP holds around a 20% stake in
Russia's Rosneft.
Looking ahead, the oil giant said it expects fourth-quarter
production to be higher following the completion of seasonal
maintenance and turnaround activities.
Oil companies' earnings have been hit by weaker oil and gas
prices. Last week, Norway's Equinor ASA and Italy's Eni SpA
announced declines in their third-quarter earnings, citing lower
energy prices.
BP shares closed down 3.8% in London on Tuesday.
BP's production was also hobbled by maintenance activities in
some of the company's highest-margin regions. Hurricane Barry in
the Gulf of Mexico shut down some of its facilities for about 14
days, it said.
The company had flagged its impairment charge of $2.6 billion
related to divestments earlier this month, having sold U.S. assets
at lower prices than expected. In the quarter, BP sold its Alaska
assets to privately held Hilcorp Energy Co. for $5.6 billion. The
sale accounted for about $1 billion of the impairment charge.
The impairment also increased gearing -- the ratio of BP's
market cap to debt -- to 36% including leases. It is above the
company's target range of 20-30%, but BP said it should be
temporary and gearing should fall to the middle of that range in
2020 as the company reduces debt.
The company said it expects to complete its $10 billion
divestment program ahead of schedule -- by the end of this year
instead of 2020. Divestments made this year totaled $7.2 billion by
the end of the third quarter.
Total revenue for the third quarter was $62.29 billion, compared
with $80.80 billion the previous year, BP said. The company
reported a net loss of $749 million.
Underlying replacement-cost profit before interest and tax in
the upstream business -- which produces oil and gas -- fell to
$2.14 billion from $4 billion for the same period a year ago. The
contribution from Rosneft Oil Co. was more resilient however, at
$802 million, down from $872 million a year ago.
Operating cash flow, excluding payments relating to the 2010
Deepwater Horizon oil spill, was $6.5 billion, while net debt rose
to $46.5 billion, BP said. The company paid roughly $400 million in
connection to the oil spill in the Gulf of Mexico as part of a $20
billion settlement with the U.S. government in 2015.
BP maintained its quarterly dividend at 10.25 cents a share.
Write to Sarah McFarlane at sarah.mcfarlane@wsj.com
(END) Dow Jones Newswires
October 30, 2019 02:47 ET (06:47 GMT)
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