BP returned to a profit in the third quarter as crude prices and energy demand recovered, but the oil producer warned that the outlook remained volatile as the pandemic threatens the global economy.
Underlying profit on a replacement cost basis — a measure of income tracked most closely by oil analysts — was $86m in the three months to September 30.
That beat analysts’ forecasts for a loss of $120m, but was down 96 per cent from $2.3bn in the same period last year, the company said on Tuesday.
BP said it had benefited from the absence of major exploration write-offs, in contrast with the previous quarter, even though earnings took a hit from “significantly lower” results at its oil trading business.
Although the price of crude oil has recovered from the lows of April — below $20 a barrel — it is struggling to stay much above $40 a barrel and is still far away from January’s $70 level as new outbreaks emerge.
“The ongoing impacts of the Covid-19 pandemic continue to create a volatile and challenging trading environment,” BP said. “The shape and pace of the recovery is uncertain, as it depends on the further spread of the pandemic.”
Margins in the refining business “remain challenging” due to bloated stockpiles and a stalled demand recovery for petrol and jet fuel, BP cautioned.
The pandemic is accelerating an overhaul of the company under Bernard Looney, its chief executive, who started in his role in February and promised to transform BP into a net-zero emissions company by 2050.
BP is reshaping its corporate strategy to fit a lower-carbon future and is restructuring its business. Investors, however, have yet to be convinced by the company’s plan to shrink its exploration and production business and rapidly expand into renewables.
Its share price, which rose 1.5 per cent in early trading on Tuesday, has fallen to multi-decade lows in recent weeks.
“Our priority is execution and, despite a challenging environment, we are doing just that,” said Mr Looney on Tuesday.
The entire oil sector has been forced into cash conservation mode after governments imposed lockdowns and travel bans to contain the spread of the virus this year, prompting a collapse in oil demand.
To bolster its finances, BP said in August that it would cut the dividend for the first time since the Deepwater Horizon disaster in 2010. It maintained the payout at 5.25 cents. BP has slashed capital spending by billions of dollars, pledged to cut costs, including 10,000 jobs, secured new credit lines, issued bonds and deferred exploration activity.
“While the results were better than expected, they are still extremely weak and it is far too early to anticipate a change in market evaluation of BP’s likely future performance under its radical new strategy,” said Colin Smith, an analyst at Panmure Gordon.
BP plans to sell $25bn in assets by 2025, about half of which the company says have been agreed on, to cut its mountain of debt and pay for its renewables investment plans.
Last month, BP made its first foray into offshore wind power, agreeing to buy a 50 per cent stake in two US projects from Norway’s Equinor for $1.1bn.
Net debt fell to $40.4bn from $40.9bn in the latest quarter. BP expects it to fall further this year as proceeds for its petrochemicals deal to Ineos are received.
BP said its future financial performance “will be impacted by the extent and duration of the current market conditions . . . It is difficult to predict when current supply and demand imbalances will be resolved”.
The UK group is the first big oil company to report earnings this week. Italy’s Eni reports its financials on Wednesday, followed by Royal Dutch Shell on Thursday. France’s Total, along with ExxonMobil and Chevron of the US, report on Friday.
https://news.google.com/__i/rss/rd/articles/CBMiP2h0dHBzOi8vd3d3LmZ0LmNvbS9jb250ZW50L2NjN2U2MzIzLWFiMzctNGZkMy05YTY3LTNjYWIwODhjYTQ4ZtIBP2h0dHBzOi8vYW1wLmZ0LmNvbS9jb250ZW50L2NjN2U2MzIzLWFiMzctNGZkMy05YTY3LTNjYWIwODhjYTQ4Zg?oc=5
2020-10-27 10:27:00Z
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