A BP petrol station in Kloten, Switzerland, on Oct. 3, 2017.Arnd Wiegmann/Reuters
BP BP-N on Tuesday reported a 30 per cent 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 decline was smaller than expected amid a slowdown in global economic activity and oil demand, particularly in China, but raises pressure on CEO Murray Auchincloss, who has vowed to boost BP’s performance in the face of investor concerns over its energy transition strategy.
“We’ve been making massive progress focusing and simplifying the business,” Auchincloss told Reuters.
BP shares, which were trading 1.7 per cent lower on Tuesday, have underperformed those of its rivals so far this year, falling 15 per cent compared with a 2 per cent decline for Shell SHEL-N and a 19 per cent 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 had 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 BP will bring in partners to offshore wind projects over time.
Auchincloss also said 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.
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 per cent from a year earlier to 2.38 million barrels of oil equivalent per day, 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.
“Refining margins are dismal right now. The third quarter was a tough quarter, and the start of the fourth quarter is pretty bad as well,” Auchincloss said.
Its debt-to-market capitalisation ratio, known as gearing, rose to 23.3 per cent from 20.3 per cent a year earlier.
