BP shares slump as Q3 profit misses forecast on weak gas

By Ron Bousso and Shadia Nasralla

LONDON (Reuters) – BP (NYSE:) on Tuesday reported third-quarter earnings of $3.3 billion, missing analysts’ forecasts due to weak gas trading results while the firm wrote down a large chunk of a U.S. offshore wind project.

BP shares were 4.3% lower by 1325 GMT after the results fell well short of expectations for a $4 billion net income, the company’s second straight substantial quarterly miss.

Interim CEO Murray Auchincloss said that strong oil trading earnings and refining margins in the third quarter were offset by weak trading where there had been a “lack of volatility” due to high inventory levels in Europe and the United States ahead of winter.

The British company maintained its dividend at 7.27 cents per share and extended its $1.5 billion share buyback programme over the next three months, leaving its payout policy unchanged.

BP wrote down $540 million in the quarter on its wind power projects offshore New York after officials rejected a request for better terms to reflect what BP referred to as “inflationary pressures and permitting delays”.

Norway’s Equinor, BP’s partner in the projects, booked a $300 million impairment on Friday.

“New York put out a 10-point plan, which would help move these projects forward… We’ll be looking at that with our partner Equinor and deciding what we do moving forward,” Auchincloss told Reuters.

BP paid Equinor $1.1 billion in 2020 for a 50% stake in the venture to develop the Empire and Beacon offshore wind projects which have a combined capacity of 3.3 gigawatts, capable of powering 2 million homes.

“Earnings missed across all divisions. In the downstream, customers & products reported $2.1 bln vs consensus $2.4 bln, despite being supported by very strong oil trading results, suggesting weaker refining margin capture in the third quarter,” said RBC analyst Biraj Borkhataria.

Rivals Chevron (NYSE:) and Exxon Mobil (NYSE:) last week posted sharp year-on-year drops in third quarter profit as energy prices cooled.

Shell (LON:) reports results on Thursday.

COMMITTED TO STRATEGY

The $3.3 billion third-quarter underlying replacement cost profit, the company’s definition of net income, was up from $2.6 billion in the prior three months due to higher oil and gas production, strong refining margins, lower refinery maintenance and “a very strong oil trading result”.

But gas marketing and trading were weak after two quarters of “exceptional” gas trading results, Auchincloss said.

“Gas prices were really flat… trading organisations make money on volatility,” he said.

The result was also less than half the $8.15 billion notched up in the third quarter of 2022 when the profits of energy majors spiked to record levels on soaring oil and gas prices.

BP expects capital expenditure of $16 billion this year, the lower end of its indicated range of $16-$18 billion, and also sees “significantly lower” industry refining margins in the fourth quarter than in the third.

BP remains committed to its strategy, Auchincloss told Reuters after the company’s first set of results since Bernard Looney stepped down as CEO on Sept. 12 for failing to fully disclose details of past personal relationships with colleagues.

No permanent successor has been named.