BP’s profits fell sharply in the third quarter, hurt by lower oil prices, but strong refining operations helped the firm beat expectations even after taking a one-off $2.6bn (€2.3bn) charge linked to asset sales.
BP, like other big energy companies, has been hit by a sharp drop in oil prices as trade tensions between the US and China have impacted global oil demand. Its shares slumped 4.5%.
The oil company made its first net loss in more than three years in the quarter due to the one-off charge, but CEO Bob Dudley, who will step down next year after a decade at the helm, said underlying earnings and cash flow were strong. Cash flow from operations was unchanged in the quarter from a year earlier at $6.1bn despite a 17% drop in oil prices.
“In a challenging quarter for energy, BP results are remarkably resilient,” said Bernstein analyst Oswald Clint.
The $2.6bn charge resulted in a $700m net loss but this will not come as a surprise to investors.
BP flagged earlier this month it would take a non-cash charge of $2bn to $3bn in the quarter as it gets closer to disposing of assets worth $10bn by the end of 2019 — a year ahead of schedule.
So far this year, BP’s proceeds from divestments reached $1.4bn. BP last year acquired BHP’s US shale assets for $10.25bn that turned BP into one of the largest shale oil drillers.
It also announced the sale of its Alaskan business to Hilcorp Energy for $5.6bn.
Third-quarter underlying replacement cost profit, the company’s definition of net income, fell 40% from the year earlier period to $2.3bn. That exceeded a forecast of $1.73bn in a company-provided survey of analysts and compared to $2.81bn in the second quarter of 2019.
In a sign of confidence, BP eliminated a scrip dividend for the quarter which allows investors to get shares instead of cash, a measure used during the industry downturn.
Oil and gas production, excluding BP’s share from its 19.7% stake in Russia’s Rosneft, was down 2.5% from a year earlier at over 2.56m barrels of oil equivalent per day as a result of maintenance at several high-margin fields and a two-week disruption to production in the US Gulf of Mexico from Hurricane Barry [irishexaminer].
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