Oil giant BP reports drop in third-quarter net profit

BP’s third quarter performance was hit by lower oil prices and refining margins – Copyright AFP/File SEBASTIEN BOZON

Britain’s BP on Tuesday announced a sharp fall in net profit for the third quarter, with the oil and gas giant hit by weak oil trading and refining margins.

Profit after taxation slumped to $206 million in the three months to September, after a net profit of $4.9 billion in the same period in 2023, BP said in a results statement.

The group earlier this month flagged to markets that its latest earnings would take a sizeable hit after oil prices have fallen on concerns over Chinese demand and the prospect of higher crude production in 2025.

The company’s underlying replacement cost profit excluding exceptional items — a measure of operating earnings — came in at $2.3 billion, down more than $1 billion from a year earlier.

Total revenue dropped around 11 percent to $48.3 billion.

Energy majors have also been impacted by declining gas prices, which have fallen heavily since soaring after the invasion of Ukraine by major energy producer Russia in early 2022.

“In oil and gas, we see the potential to grow through the decade with a focus on value over volume,” chief executive Murray Auchincloss said in an earnings statement.

Looking to the fourth quarter, the company said it expects to report lower upstream production and lower volumes, and for refining margins to remain low. 

Despite the results beating analysts expectations, shares in the company dropped around one percent in morning deals on the news.

“Refining margins continue to be a thorn in BP’s side,” said Derren Nathan, head of equity research at Hargreaves Lansdown.

The oil giant is “holding its nerve” by upping its dividend payment and releasing another $1.75 billion to buy back more shares, he added. 

– Oil prices –

Global oil demand has been weighed down in recent months by an economic slowdown in China, the world’s largest importer of crude.

“The uncertain economic backdrop, including growth concerns for China, continue to offer uncertainty over future energy demand and usage”, said Keith Bowman, equity analyst at Interactive Investor.

However, oil prices soared in early October on escalating tensions in the Middle East, particularly between Israel and Iran, which drove concerns about supply from the region.

Prices have since eased again after Israel came under international pressure not to strike Iranian oil installations and concerns around Chinese demand reignited. 

Under the new CEO Auchincloss, who took up the role in January, BP has said it will focus more on oil and gas to raise profits and has walked away from various climate commitments — a strategy also taken up by its rival Shell. 

Earlier this year, BP gave the green light to the Kaskida oil project in the US Gulf of Mexico, the group’s sixth hub in the area, with production set to begin in 2029. 

Shell will report its third-quarter earnings on Thursday, after it too warned of lower refining margins.