BP has announced a significant decline in its third-quarter profit, reporting earnings of $2.3 billion—a 30% drop and the lowest figure in nearly four years. The decrease in profit reflects weaker refining margins and less favorable results in oil trading, which come amidst a slowdown in global economic activity and oil demand, particularly in China.
Despite the disappointing figures, the profit decline was smaller than analysts had anticipated, putting less immediate pressure on CEO Murray Auchincloss, who has been tasked with improving BP’s performance amid investor concerns regarding the company’s 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 stated in a press release.
BP’s shares opened 0.8% lower following the announcement and have underperformed compared to rivals this year. The stock has dropped 15%, contrasting with a 2% decline for Shell and a 19% gain for Exxon Mobil. Investors have raised questions about BP’s ability to generate sustainable profits moving forward.
Since taking the helm in January, Auchincloss has shifted BP’s focus toward high-margin businesses, marking a departure from his predecessor Bernard Looney’s strategy of rapidly expanding renewables and decreasing oil and gas output. Reports from Reuters earlier this month indicated that BP has abandoned its flagship target to cut oil and gas production by 2030 and has scaled back investments in low-carbon hydrogen. Additionally, the company is contemplating selling a minority stake in its offshore wind business.
In today’s report, Auchincloss emphasized that BP has the potential to grow oil and gas output through the end of the decade while continuing to invest in low-carbon and renewable energy solutions.
The company’s underlying replacement cost profit, BP’s definition of net income, was $2.27 billion for the third quarter—above the forecast of $2.05 billion but down from $2.8 billion in the previous quarter and $3.3 billion a year earlier. This represents the lowest profit level since the fourth quarter of 2020 when earnings plummeted during the COVID-19 pandemic.
Despite the profit decline, BP’s oil and gas production rose by 3% year-over-year to 2.38 million barrels of oil equivalent per day (boed), helping to mitigate losses from refining and oil trading. The company noted that higher natural gas prices bolstered earnings, even though gas trading performance was average during the quarter.
The energy giant maintained its dividend at 8 cents per share after raising it in the previous quarter. BP also continued its share buyback program at $1.75 billion for the next three months. However, net debt rose to $24.3 billion from $22.6 billion at the end of June, primarily due to the assumption of approximately $2.5 billion in debt following the acquisition of the remaining 50% of its solar joint venture, Lightsource BP. As a result, BP’s debt-to-market capitalization ratio increased to 23.3% from 20.3% a year earlier.
