BP on Tuesday reported a 30% drop in third quarter profit to $2.3 billion, the lowest in almost four years, weighed down by weaker refining margins and oil trading results.
The drop in profit from a year earlier was, however, smaller than expected. It comes amid a slowdown in global economic activity and oil demand, particularly in China, and raises pressure on CEO Murray Auchincloss who has vowed to boost BP's performance amid investor concerns over its energy transition strategy.
"We have made significant progress since we laid out our six priorities earlier this year to make BP simpler, more focused and higher value," Auchincloss said in a statement.
BP shares, which opened 0.8% lower on Tuesday, have underperformed those of its rivals so far this year, falling 15% compared with a 2% decline for Shell SHEL.L and a 19% gain for Exxon Mobil XOM.N, as investors question the company's ability to generate profits.
Auchincloss, who took up the job in January, has vowed to focus on high-margin businesses, distancing himself from predecessor Bernard Looney's strategy to rapidly expand renewables and reduce oil and gas output.
Reuters reported earlier this month, citing sources, that BP has abandoned a flagship target to cut oil and gas output by 2030. The company has also scaled back its low-carbon hydrogen investments and plans to sell its U.S. onshore wind operations.
Sources also told Reuters that BP is considering selling a minority stake in its offshore wind business.
Auchincloss said on Tuesday that BP has the potential to grow oil and gas output through the end of the decade while it also continues to make high-grade investments in low-carbon and renewables.
Weak Refining
BP's underlying replacement cost profit, the company's definition of net income, reached $2.27 billion in the third quarter, exceeding forecasts of $2.05 billion in a company-provided survey of analysts but down from $2.8 billion in the previous quarter and $3.3 billion a year earlier.
The results were the weakest since the fourth quarter of 2020, when profits collapsed during the pandemic.
BP's oil and gas production rose by 3% from a year earlier to 2.38 million barrels of oil equivalent per day (boed), helping to offset a drop in refining margins and weaker oil trading. Higher natural gas prices further boosted earnings, although gas trading was average in the quarter, BP said.
Global oil refiners are seeing profitability drop to multi-year lows in a sharp reversal for an industry that had enjoyed surging post-pandemic returns, underlining the extent of the current demand slowdown.
The energy giant maintained its dividend at 8 cents a share after raising it in the previous quarter. It also kept the rate of its share buyback programme at $1.75 billion over the next three months and committed to do so again for the following three months.
Net debt rose to $24.3 billion from $22.6 billion at the end of June, mostly because of the around $2.5 billion in debt assumed following the completion of the acquisition of the outstanding 50% in its solar joint venture Lightsource BP last week.
Its debt-to-market capitalisation ratio, known as gearing, rose to 23.3% from 20.3% a year earlier.
(Reuters - Reporting by Ron Bousso; editing by Clarence Fernandez,Jason Neely, Kirsten Donovan)