BP, a global leader in the oil industry, encountered a notable fall in its third-quarter profits, not meeting the expectations of industry analysts. The British energy behemoth reported an underlying replacement cost profit, a standard measure for net profit, of $3.293 billion for the third quarter. This figure significantly contrasts with the $8.15 billion from the same period last year. However, it did mark a rise from the $2.59 billion profit of the second quarter.
Analyst forecasts, collated by LSEG, had anticipated a third-quarter profit of around $4.059 billion. Following the announcement, BP’s London-listed shares saw a 4% dip by mid-morning. Despite this drop, the company cited an uptick in oil and gas production and improved refining margins as contributing factors to the quarter’s growth. Additionally, a robust performance in oil trading played a role, even though it was somewhat offset by a subpar gas marketing and trading outcome.
BP’s financial statements also revealed impairments amounting to $1.2 billion. This included a notable pre-tax impairment charge of $540 million, which was linked to U.S. offshore wind ventures. The company’s capital expenditure for the quarter stood at $3.603 billion, a decrease from the previous quarter’s $4.314 billion. Yet, BP’s operating cash flow showed an upward trend both quarterly and annually, reaching $8.747 billion.
In a move to buoy investor confidence, BP unveiled a $1.5 billion share buyback scheme, slated for execution ahead of the fourth-quarter results. Biraj Borkhataria, an associate director at RBC Capital Markets, remarked, “Despite positive operational indicators, earnings have not met expectations across all sectors.”
Indeed, BP, along with other energy giants, had seen a slump in profits in the previous quarter due to declining fossil fuel prices. However, these prices experienced a swift rebound, and as a result, many reported record-breaking annual profits in 2022. BP’s forward-looking statements predict support for oil prices due to production limits set by the Organization of the Petroleum Exporting Countries and a resurgence in demand. Yet, the company also cautioned that refining margins might see a notable decline in the upcoming quarter.
Recent months have seen BP grapple with leadership upheavals. The abrupt resignation of CEO Bernard Looney in September, following revelations of undisclosed past relationships with colleagues, took many by surprise. CFO Murray Auchincloss has since stepped in as the interim CEO. Auchincloss commented on the recent results, emphasizing the company’s unwavering focus on performance and delivery.
Further leadership changes included the departure of the company’s U.S. head, Dave Lawler, who resigned shortly after Looney without elaborating on the reasons. Energy analyst Jamie Maddock noted the challenging times for BP, especially with leadership uncertainties. Maddock stated, “Given the global geopolitical tensions and central banks’ inclination towards higher interest rates, the road ahead for oil and gas majors may be tumultuous before we witness a semblance of ‘normal’ economic conditions.”