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BP announced its lowest quarterly profit since the Covid-19 pandemic as lower oil prices and weak refining margins weighed on its performance.
The FTSE 100 energy major made underlying profits of $2.27bn in the third quarter, beating average analyst estimates of $2.05bn. That was down from $2.8bn in the second quarter and from $3.3bn in the same period in 2023.
The 30 per cent year-on-year drop in earnings will maintain pressure on chief executive Murray Auchincloss who has pledged to make BP “simpler, more focused and higher value” but has so far struggled to boost performance, which has largely lagged behind rivals in 2024.
Thursday’s result was the lowest quarterly profit since 2020, during the height of the coronavirus pandemic, when restrictions on movement crushed oil demand.
Auchincloss permanently took over from Bernard Looney in January. The Canadian executive has insisted that Looney’s plan to transform BP from an oil and gas producer into an integrated energy provider selling a broader range of products remains unchanged. But he has placed far more emphasis than his predecessor on BP’s traditional fossil fuel business.
In July, Auchincloss approved a major expansion of oil production in the US Gulf of Mexico and said on Tuesday that BP saw “the potential” to grow the oil and gas business “through the decade with a focus on value over volume”.
The comments will provoke further investor questions over whether Auchincloss has in effect abandoned BP’s pledge to cut oil and gas output by 25 per cent by 2030. BP is the only group in the sector committed to cutting oil and gas production in order to reduce emissions.
The target means BP currently plans to produce about 2mn barrels of oil equivalent a day by the end of the decade. It pumped 2.4mn boe/d in the third quarter.
The first former chief financial officer to run BP in its 115-year history, Auchincloss has also pledged to slash costs, promising at least $2bn in savings by the end of 2026.
Despite the drop in earnings, BP said on Tuesday that it would buy back another $1.75bn of shares, maintaining its pledge to repurchase $7bn of stock this year.
But the company said it intended to “review elements” of its financial guidance, including expectations for 2025 share buybacks, in February as part of its annual strategy update.
“This should not come as a surprise, as consensus numbers are already reflecting a buybacks cut to [about] $4bn-$5bn, from the $7bn implied in the current outlook,” said Giacomo Romeo, an oil and gas analyst at Jefferies.
The company had committed to returning at least 80 per cent of surplus cash flow to shareholders through buybacks in 2024 and 2025.
Biraj Borkhataria at RBC Capital Markets said he also expected BP to buy back fewer shares next year, given the weaker macro environment.
BP is likely to move from a buybacks model based on surplus cash flow to one based on cash flow from operations, he added, which would be more in line with the rest of the sector and allow “more room for deleveraging”.
Net debt rose by $1.7bn in the third quarter to $24.3bn.
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