The BP logo is seen outside a petrol station near Warmister in Wiltshire, England, on August 15, 2022.
Matt Cardy | Getty Images News | Getty Images
LONDON – Oil giant BP reported a sharp year-on-year profit decline on Tuesday, falling short of analysts’ estimates.
The British energy giant posted an underlying replacement cost profit, used as an indicator of net profit, of $3.293 billion in the third quarter. This was a decrease of $8.15 billion compared to the previous increase in the same period, but an increase from the $2.59 billion profit in the second quarter.
Analysts had expected third-quarter profit of $4.059 billion, according to a collection of estimates from LSEG.
The quarterly growth was driven by an increase in oil and gas production and higher realized refining margins, as well as a “very strong oil trading result,” BP said. This was partially offset by weak gas marketing and trading performance.
The company reported impairment charges of $1.2 billion, including a $540 million pretax impairment charge related to offshore wind projects in the United States.
Capital expenditures were $3.603 billion, compared to $4.314 billion in the previous quarter. Operating cash flow was higher both quarterly and year-over-year at $8.747 billion.
BP also announced a $1.5 billion share buyback to be carried out ahead of its fourth-quarter results.
“Despite some solid operating indicators, revenues fell across all business lines across departments,” Biraj Borkhataria, deputy director of European research at RBC Capital Markets, said in a note.
Borkhataria added that while the headline 20% loss in net profit came as a surprise, BP “has delivered exceptional results in gas trading on several occasions in recent years, including in the last quarter.”
Annual profits at BP and other energy companies slumped in the second quarter after fossil fuel prices weakened and have risen sharply since then. BP and others reported record annual profits for 2022.
In its outlook, BP said it expected production curbs from members of the Organization of the Petroleum Exporting Countries and a recovery in demand to support oil prices. It also expects industry refining margins to be “significantly lower” in the fourth quarter.
BP was rocked in September by the sudden departure of CEO Bernard Looney, who resigned after admitting he had not been “fully transparent” in his disclosures about past relationships with colleagues before taking the top job.
The position will be filled on an interim basis by CFO Murray Auchincloss.
The company’s US boss, Dave Lawler, announced his resignation shortly after Looney, without giving further details.
Leadership challenges have not dented BP’s share price, which rose 15.8% in the quarter ended September 30 and nearly 12% year to date, according to LSEG data.