BP, the British oil major, reported a significant decline in profits, falling short of analyst estimates. The company’s underlying replacement cost profit for the third quarter was $3.293 billion, down from $8.15 billion in the same period last year but up from $2.59 billion in the second quarter. Analysts had expected profit to reach $4.059 billion. BP’s shares dropped 4% in early trade after the announcement. Despite the decline in profits, the company experienced growth in oil and gas production, higher refining margins, and a strong oil trading result. However, weak gas marketing and trading results partially offset these gains. BP also announced a $1.5 billion share buyback.
The third quarter results reflect a challenging period for BP, as it fell short of profit expectations and experienced impairments of $1.2 billion, including a $540 million impairment charge associated with U.S. offshore wind projects. However, the company’s capital expenditure decreased from the previous quarter, and operating cash flow was higher both quarterly and year-on-year. BP’s decision to launch a $1.5 billion share buyback ahead of fourth quarter results aims to provide shareholders with a positive outlook. Despite the leadership challenges faced by the company, including the departure of CEO Bernard Looney and U.S. boss Dave Lawler, BP’s share price has remained resilient, gaining 15.8% in the third quarter and nearly 12% year-to-date.
Looking ahead, BP expects production restrictions from OPEC members and a rebound in demand to support oil prices. However, the company anticipates significantly lower industry refining margins in the fourth quarter. The decline in profits for BP and other energy majors in the second quarter was primarily attributed to weaker fossil fuel prices, which have since risen sharply. Despite this setback, BP reported record annual profits in 2022. CFO Murray Auchincloss, who is currently serving as interim CEO, expressed confidence in the company’s solid quarter and its focus on operational performance.
