BP quarterly profits lowest since pandemic

Weaker refining margins and a fall in the oil price have pushed profits at BP to the lowest level since the pandemic, applying further pressure to the boss of the oil major as he attempts to revive the share price.
Adjusted profits for the FTSE 100 oil company declined to $2.3 billion for the September quarter from $3.3 billion a year earlier, although they were ahead of a consensus forecast of $2.05 billion.
It was the weakest three-month profit since the end of 2020, when global lockdowns forced down oil demand.
Lower refinery margins on products including diesel and jet fuel and a writedown against the value of the Gelsenkirchen refinery in western Germany hit earnings by $358 million and pushed adjusted profits for its customers and products division down to $381 million, from $2.1 billion a year earlier.
The shares, which closed down 19¾p, or 5 per cent, at 379¼p on Tuesday, have fallen 19 per cent since the start of the year, underperforming Shell, its London-listed peer, and American counterparts in the oil and gas sector.
Murray Auchincloss, who was appointed permanent chief executive of the oil major in January, has been attempting to close the valuation gap with rivals by setting out a plan to remove costs and simplify the business.
“I can’t control share price. What I can control is underlying business and getting the business set up for success,” Auchincloss, 54, said.
BP pumped 2.4 million barrels of oil equivalent a day (boed) in the third quarter, 3 per cent higher than a year earlier. However, Brent crude, the international benchmark, fell in price to $80.34 a barrel during the quarter, down from $86.75 a year earlier. UK gas prices fell to 81.77p per therm, from 82.03p per therm.
Expectations are mounting that BP will drop a target set by Bernard Looney, its previous chief executive, to reduce oil and gas output by 25 per cent to about 2 million boed by the end of the decade, compared with 2019 levels, in an effort to win over investors. The goal had already been scaled back last year from a previous target to reduce production by 40 per cent.
Auchincloss said that the group saw “the potential to grow through the decade with a focus on value over volume”.
The group pressed ahead with plans to return a further $1.75 billion in share buybacks to investors before the end of the year. In February, the company set a target to return $14 billion through repurchasing shares over this year and the next.
BP has signalled that it intends to reset its share buyback targets when it next updates the market on its capital allocation plans in February.
Analysts expect share buybacks to be cut next year as the group attempts to pay down debt and reduce its gearing, which is higher than most peers in the oil and gas sector. Net debt rose to $24.3 billion at the end of September, from $22.6 billion three months earlier.
Kate Thomson, BP’s finance chief, said the proceeds from some disposals had slipped into the current quarter, which had detracted from efforts to bring down leverage. “It’s a strong balance sheet. We’re well graded, we’re A+ with Fitch and Moody’s,” she said.
Auchincloss has already set out plans to save at least $2 billion in costs by the end of 2026 and has frozen external hiring, except for frontline roles, well-site leaders and other safety-critical roles. So far the company has identified $500 million in cost savings.
The company has also stopped bidding on new offshore wind licences. Instead, resources have been focused on existing projects in the UK and Germany where development is already under way.