BP Swung to 3Q Loss on Weaker Upstream Earnings, Impairment Charge -- Update
October 29 2019 - 4:22AM
Dow Jones News
--BP swung to 3Q replacement-cost loss of $351 million from
$3.09 billion profit a year earlier
--Underlying replacement-cost profit of $2.25 billion beat a
company-compiled consensus
--Revenue fell to $62.29 billion from $80.80 billion amid weaker
oil and gas prices
By Sarah McFarlane and Giulia Petroni
BP PLC (BP.LN) said Tuesday that it swung to a loss in
third-quarter earnings as it reported a divestment-related charge
as well as lower upstream earnings.
The London-based energy giant posted a replacement-cost loss--a
metric similar to the net-income figure that U.S. oil companies
report--of $351 million for the three months ended Sept. 30
compared with a profit of $3.09 billion in the year-earlier
period.
Stripping out the one-off items, BP's results exceeded analysts'
expectations, with the underlying replacement-cost profit--the
company's preferred metric--at $2.25 billion, above a
company-compiled consensus of 24 brokers' estimates forecasting
$1.73 billion. Still, the result was well below the same period
last year when BP's underlying replacement-cost profit was $3.84
billion.
Oil companies' earnings have been hit by weaker oil and gas
prices. Last week, Norway's Equinor ASA (EQNR.OS) and Italy's Eni
SpA (ENI.MI) both reported a fall in earnings for the third
quarter, citing lower energy prices.
BP shares were down about 0.6% in early trading in London.
BP's production was also hit by maintenance activities in some
of the company's highest-margin regions, as well as Hurricane Barry
in the Gulf of Mexico, which shut down facilities for about 14
days, the company said.
The impairment charge of $2.6 billion related to divestments had
been flagged earlier this month by BP, having sold U.S. assets at
lower prices than expected. In the quarter, BP sold its Alaska
assets to privately held Hilcorp Energy Co. for $5.6 billion. The
sale resulted in around $1 billion of the impairment charge.
The impairment also increased gearing--the ratio of BP's market
capitalization to debt--to 36% including leases. This is above the
company's target range of 20-30%, but BP said this should be
temporary and that gearing should fall to the middle of that range
in 2020 as the company reduces debt. BP said that it expects to
complete its $10 billion divestment program ahead of schedule, by
the end of this year instead of 2020. Divestments made this year
totaled $7.2 billion by the end of the third quarter.
Total revenue for the third quarter was $62.29 billion compared
with $80.80 billion the previous year, BP said. The company
reported a net loss of $749 million.
Underlying replacement-cost profit before interest and tax in
the upstream business--which produces oil and gas--fell to $2.14
billion from $4 billion last year. The contribution from Rosneft
Oil Co. (ROSN.MZ) was more resilient however, at $802 million, down
from $872 million the same period a year ago.
BP's results exceeded market expectations due to
better-than-expected downstream and Rosneft contributions,
Bernstein analyst Oswald Clint said. BP holds around a 20% stake in
Russia's Rosneft.
Looking ahead, BP said it expects fourth-quarter production to
be higher thanks to the completion of seasonal maintenance and
turnaround activities.
Operating cash flow, excluding payments related to the 2010
Deepwater Horizon oil spill, was $6.5 billion, while net debt rose
to $46.5 billion, BP said. The company paid roughly $400 million in
connection to the oil spill in the Gulf of Mexico as part of a $20
billion settlement with the U.S. government in 2015.
BP maintained its quarterly dividend at 10.25 cents a share.
"We think some investors have been calling for a
dividend-per-share increase in the near term, however, given where
the balance sheet stands, this is a prudent step in our view," said
Biraj Borkhataria, co-head of European energy research at RBC
Capital Markets.
Write to Sarah McFarlane at sarah.mcfarlane@wsj.com and Giulia
Petroni at giulia.petroni@wsj.com
(END) Dow Jones Newswires
October 29, 2019 05:07 ET (09:07 GMT)
Copyright (c) 2019 Dow Jones & Company, Inc.
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