BP profits plunge 40% as the firm is hit by hurricanes and a lower oil price but it still tops analyst expectations
- The oil giant’s underlying replacement cost profit fell to $2.3 billion
- Analysts had estimated that the figure would be only $1.7 billion
The low oil price and hurricanes in the Gulf of Mexico combined to form a deadly cocktail for oil giant BP as the company revealed net income had dropped by nearly 40 per cent.
Underlying replacement cost profit, the term BP uses for net income, fell to $2.3billion in the third quarter of the year.
But the dramatic drop was still considerably better for the company than analysts had been predicting, as its refineries outperformed.
A consensus of analysts, compiled by BP, estimated that the figure would be $1.7 billion (£1.3 billion).
Oil giant BP has revealed its net income dropped by nearly 40 per cent
‘BP delivered strong operating cash flow and underlying earnings in a quarter that saw lower oil and gas prices and significant hurricane impacts,’ said outgoing chief executive Bob Dudley.
It will likely be the last third quarter results presented by the American, who has announced that he will be stepping down next year.
He is set to be replaced by Bernard Looney, the Irishman currently in charge of upstream, the BP arm which explores and produces new oil and gas.
It has been a quarter of change, with the business making big inroads into a $10billion (£7.8 billion) programme to sell off assets. In August, BP said it had reached a deal that will see Hilcorp take over all its oil fields and operations in Alaska, a $7.2billion deal (£56 billion).
But the sale also had a sting in the tail as the company was forced to write off $2.6billion (£2billion) because of tax charges, swinging BP to a $749 million (£583million) loss for the quarter.
‘Today’s third quarter numbers weren’t expected to come in close to the levels seen in second quarter given the decline in oil prices seen since then, however they still show a company that is nimbler and more efficient than it was a decade ago,’ said Michael Hewson, chief market analyst at CMC Markets.
The oil major also entered troubled waters as the impact of Hurricane Barry, which ripped through the Gulf of Mexico in July, shutting down oil fields, helped push down oil and gas production by 2.5 per cent.
Production is expected to increase in the fourth quarter from the period before as the company completes maintenance on its sites.
David Barclay, senior investment manager at Brewin Dolphin, commented: ‘Lower oil prices, maintenance and weather impacts have combined to swing BP to a loss – albeit, the results are ahead of expectations.
‘This quarter’s performance could be seen as a reminder of just how much of a difference volatile oil prices can have on the majors’ results. Despite the loss, there are positives to take from the expansion of the downstream business, the progress of BP’s divestment programme, and greater cash flow.
‘However, the upstream division and gearing remaining beyond target are areas for concern, while investors will also take a short-term hit from the scrapping of the scrip dividend.’