Global oil giant BP has today reported an underlying profit of £66m for Q3 2020. Today’s total has been helped by stronger oil prices over the last few months.
A statment from the company read: “The ongoing impacts of the COVID-19 pandemic continue to create a volatile and challenging trading environment.”
Underlying replacement cost profit for the quarter was £800m, compared with a loss of £5.15bn for the second quarter of 2020 and £1.77bn profit for the third quarter of 2019. Compared to the previous quarter, the result benefitted from the absence of significant exploration write-offs and recovering oil and gas prices and demand. This was partly offset by a significantly lower oil trading result.
Bernard Looney, BP’s Chief Executive Officer said: “Having set out our new strategy in detail, our priority is execution and, despite a challenging environment, we are doing just that – performing while transforming. Major projects are coming online, our consumer-facing businesses are really delivering and we remain firmly focused on cost and capital discipline. Importantly, net debt continues to fall. We are firmly committed to our updated financial frame, including the dividend – the first call on our funds.”
BP returns to profit as transformation strategy unfolds
Susannah Streeter, senior investment and markets analyst, Hargreaves Lansdown
It’s still tough out there for BP, but there are signs that the company has turned a corner, with underlying profit coming in at $100 million. It’s a stark improvement on the underlying loss of $6.7bn in the second quarter, when it took a huge hit after writing down the value of its oil fields and exploration projects. An uptick in global demand for oil has certainly helped but there is still a huge task ahead for the company to make the pivot to a green energy future while grappling with the collapse in the oil price.
Despite the challenges, BP has resisted making further cuts to its dividend, which would have been highly unpalatable to shareholders, with the company stressing it will be ’the first call on our funds’.
The CEO Bernard Looney is trying to perfect the complex move of reassuring them he is not abandoning oil and gas, while demonstrating the huge potential of renewable energy. The company says this strategy of ‘performing while transforming’ is slowly paying off, with a strategic partnerships agreed with Equinor to enter the US offshore wind sector and with Microsoft to supply renewable energy. It’s also agreed a deal to set up a network of ultra-fast chargers in Germany.
Already 2,800 jobs have gone in 2020, and its targeting $2.5 billion in annual cash cost savings by the end of 2021 compared to 2019. Offloading assets is a big part of the strategy to turn around fortunes, with the $5 billion sale of its petrochemicals business expected by the end of the year.
The level of debt is slowly reducing, but the Gulf of Mexico oil spill disaster is still having an impact on the bottom line, with payments in the quarter mounting to $100 million. Tropical Storm Zeta, heading for the region, is now also proving a short term operational challenge with the company forced to evacuate staff from offshore platforms.
The focus for the company in the longer term will be on making the most of its remaining oil fields while investing in a low carbon future, and it’s a very tricky manoeuvre to get right.
BP won’t stop being an oil & gas company overnight, but the direction of travel is clear but it’s going to be an expensive road to go down.