BP swings back into profit after bruising Q2

BP has swung back to a profit in its most recent quarter, bouncing back from a multi-billion-dollar loss and outperforming expectations as the price of oil started to recover.

BP said it has seen a recovery in the demand for oil. Picture: BP.

The oil giant said it had made an underlying replacement cost profit of $86 million (£66m) in the third quarter of the year. Just three months ago BP said it had lost $6.7 billion by the same measure in the second quarter, and analysts were expecting another, albeit smaller, loss of $120m in the most recent three months.

However, the figures still show the business has taken a major hit this year from the Covid-19 crisis and the impact on oil prices. Compared with the third quarter last year, replacement cost profit dropped by almost 97 per cent from $2.3bn.

Michael Hewson, an analyst at CMC Markets, said the stronger results "can't disguise the challenges facing the industry". The company's shares have been declining rapidly this year, and have lost 30 per cent of their value since BP slashed its dividend for the first time in a decade in August.

BP said it had seen a recovery in the demand for oil, as the Asian economies start opening up again following the pandemic. Earlier this year, the demand for oil was so low that some sellers in the US were paying buyers to take it off their hands.

Brent crude, the measure most used in the UK, has rebounded from lows of less than $19 per barrel in April, to more than $40 today. BP said it would pay shareholders a 5.25 cent (4p) dividend, down from 10.25 cents (7.9p) this time last year. It made a $150m profit before tax, on revenue of $44.2bn.

BP has set a new course over the last nine months since new boss Bernard Looney took the helm. With a focus on becoming greener, the company has promised to become "net zero" by the middle of the century, and slash oil and gas production by 40 per cent by the end of the decade.

Mr Looney said today: "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."

Improvement

Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown, said: ''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 $100m (£77m).

"It's a stark improvement on the underlying loss of $6.7bn in the second quarter … 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.“BP won't stop being an oil and gas company overnight, but the direction of travel is clear – [although] it's going to be an expensive road to go down.''

A message from the Editor:

Thank you for reading this article. We're more reliant on your support than ever as the shift in consumer habits brought about by Coronavirus impacts our advertisers.

If you haven't already, please consider supporting our trusted, fact-checked journalism by taking out a digital subscription.