BP reports lowest quarterly profit since pandemic on weak oil prices

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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.

Tuesday’s result was the lowest quarterly profit since 2020, during the height of the coronavirus pandemic, when restrictions on movement crushed oil demand. BP’s shares were down 4 per cent in afternoon trading in London, falling by about 18 per cent in the year to date.

In an interview with the Financial Times, Auchincloss said BP’s headline profits would always be subject to changing commodity prices but insisted the company had made “massive progress in simplifying and focusing the business”.

The first former chief financial officer to run BP in its 115-year history, Auchincloss has pledged to slash costs, promising at least $2bn in savings by the end of 2026.

“We’ve stopped 24 projects, [and sanctioned] six, focusing on the highest value ones [and] we are divesting assets that won’t compete for capital in the business,” he said, pointing to a planned sale of its US onshore wind business.

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 company selling a broad range of lower-carbon 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. The shift in tone has provoked investor questions over whether Auchincloss has in effect abandoned BP’s industry-leading pledge to cut oil and gas output by 25 per cent by 2030 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.

Asked whether the target remained in place, Auchincloss said he was focused on the “value” of BP’s oil and gas production, not the “volume”.

“I’m trying to drive cash flow growth through the decade in the upstream to drive high returns. Any time in the past when we focused on volume targets?.?.?.?we just made the wrong decision,” he said, adding that BP would update investors on its strategy in February.

“The big point for me is this is about transitioning the business to lower carbon energy systems over time,” he said. “Will it be as fast as we originally envisioned? Maybe not. But we’re certainly being pragmatic, moving with society and driving that change in the business.”

BP had made progress in that regard in the third quarter, Auchincloss said, by completing the buyout of its joint venture partners in international solar power developer BP Lightsource and the Brazilian biofuel producer BP Bunge Bioenergia.

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 has committed to returning at least 80 per cent of surplus cash flow to shareholders through buybacks in 2024 and 2025.

In the UK, BP has previously outlined plans to invest £18bn between 2022 and 2030 on projects including electric vehicle charging and offshore wind power, representing 15 to 20 per cent of the group’s global capital expenditure.

Auchincloss told the FT he had engaged with the UK’s new Labour government “at the top level” and found the conversations to be “constructive”.

“They move fast,” he said, noting that the government this month announced up to £21.7bn in support for carbon capture and storage projects, including a BP-backed project in Teesside. “So far so good” he added.