BP reported a sharp fall in third-quarter profits after being stung by lower oil prices and Hurricane Barry in the Gulf of Mexico, sending shares down nearly four per cent.
The energy major reported an underlying replacement cost profit – the industry’s preferred performance benchmark – of $2.3 billion, down from $3.8bn a year earlier. Profits fell as BP’s upstream operations reported average oil and gas production averaged 3.7 million barrels of oil equivalent a day, down from 3.6 million, as the hurricane hampered production significantly in July. The impact of maintenance shutdowns was also cited.
However, the drop in profits was not as steep as forecast, despite the giant booking one-off costs of $2.6bn related to the disposal of assets.
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Unveiling his final results before stepping down as chief executive early next year, Bob Dudley said: “BP delivered strong operating cash flow and underlying earnings in a quarter that saw lower oil and gas prices and significant hurricane impacts. Our focus remains firmly on maintaining financial discipline and delivering safe and reliable operations throughout BP. We’re also continuing to advance our strategy, making strong progress with our divestment plans and building exciting new opportunities in fast-growing downstream markets in Asia.”
The company’s divestment programme continued in the third quarter, with the deal to sell its interests in Alaska to Hilcorp Energy taking proceeds from asset sales to $7.2bn by the end of the period. It expects the amount raised by divestments to reach around $10bn by year end.
BP said it expects reported production to be higher in the final quarter due to the completion of seasonal maintenance and turnaround activities.
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It did not provide a specific update on its operations in the North Sea, where it greatly reduced its exposure in light of the plunge in crude oil prices between 2014 and 2016, selling off a raft of assets and shedding hundreds of jobs. However, the North Sea remains one of its top global production regions, with assets including the giant Clair Ridge development West of Shetland. It now employs around 1,200 in roles connected to the North Sea.
Production on the Clair Ridge field began in November last year following a $4.5 billion investment programme which BP said underlines its commitment to the North Sea region. It expects to recover 640 million barrels over several decades.
The company announced a quarterly dividend of 10.25 cents per ordinary share yesterday, in line with last year, though the board has suspended the scrip dividend for the third quarter.
David Barclay of stockbroker Brewin Dolphin said: “Lower oil prices, maintenance and weather impacts have combined to swing BP to a loss – albeit, the results are ahead of expectations. This quarter’s performance could be seen as a reminder of just how much of a difference volatile oil prices can have on the majors’ results.”
Mr Dudley will be replaced by North Sea veteran Bernard Looney in February.
Shares closed down 3.8% at 492.55p.
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