BP posts its weakest quarterly profit in almost four years as oil prices fall

BP’s profits fell to the lowest level in almost four years in the third quarter, due to weaker oil prices and refining margins.

The energy giant made an underlying replacement cost profit – the favored measure of profit – of $2.3 billion (£1.75 billion) in the three months ended September.

While this figure exceeded analyst expectations of US$2.1 billion ($2.15 billion), it was about US$500 million less than BP earned in the previous three months, and US$1 billion less than the same period last year.

It was also the weakest result since the fourth quarter of 2020, when falling oil demand due to strict Covid-related restrictions limited net profit to $115 million.

BP said trading has been hit in recent months by “lower refining margins and weak contributions to oil trading.”

The average Brent crude oil price fell more than 7 percent year-on-year to $80.34 per barrel, due to rising production from OPEC+ countries and a slowing Chinese economy.

Over the same period, natural gas prices fell more than 15 percent to $2.15 per million British thermal units, partly due to increasing production and warm weather.

Prices of both oil and gas have fallen since the summer, despite growing concerns about disruption to global energy supplies due to conflict in the Middle East.

Under CEO Murray Auchincloss, BP is scaling back its renewable energy strategy in favor of fossil fuels after significant pressure from investors.

The FTSE 100 company has suspended all new offshore wind projects and signed a Memorandum of Understanding with the Iraqi government to develop and explore the Kirkuk oil field.

Reuters reported earlier this month that BP is considering abandoning plans to cut oil and gas production by 2030, which were instituted under former CEO Bernard Looney.

Auchincloss said: ‘In the oil and gas sector we see the potential to grow over the next decade with an emphasis on value over volume.

‘We also have a deep belief in the opportunities that the energy transition offers. We have achieved a number of leading positions and will continue to level our investments to ensure they are competitive with the rest of our business.”

BP kept the dividend unchanged at 8 cents per share and announced a new share buyback program worth $1.75 billion.

However, the company’s operating cash flow fell by $2 billion to $6.8 billion, while net debt rose by about the same amount to $24.3 billion.

Danni Hewson, head of financial analysis at AJ Bell, said: ‘While better than nothing, buybacks on their own clearly won’t be enough to win over the market, especially against a backdrop of lower profits and cash flow and rising debt.

“Ultimately, BP still has a lot of work to do to convince investors that it has a clear strategy for the future.”

BP shares fell 2.4 percent to 389.4p late on Tuesday morning, meaning they have lost around a quarter of their value over the past year.