BP has recorded third quarter earnings 20% lower than the same period last year due to lower oil prices.
Underlying replacement cost profit for the quarter was $3.0 billion, compared with $3.7 billion for the same period in 2013. Operating cash flow for the quarter was $9.4 billion, compared with $6.3 billion in 3Q 2013. Total operating cash flow for the first nine months of 2014 was $25.5 billion.
“BP’s operational momentum continues to deliver results,” said Bob Dudley, BP Group Chief Executive. “Growing underlying production of oil and gas and a good downstream performance generated strong cash flow in the third quarter, despite lower oil prices. This keeps us well on track to hit our targets for 2014.”
Reflecting confidence in delivering its 2014 operating cash flow targets and the robustness of its financial framework in a weaker oil price environment, BP announced a quarterly dividend of 10 cents per ordinary share, a 5.3% year-on-year increase. It is expected to be paid in December.
BP has continued its programme of share buy-backs and $10 billion has now been used to buy back shares for cancellation since March 2013. Divestments with a cumulative value of $4 billion have now been agreed towards a total of $10 billion expected by the end of 2015.
Organic capital expenditure in the first nine months of 2014 was $16.3 billion and BP now expects organic capital expenditure for the full year to be around $23 billion, compared with previous guidance of $24-25 billion. At the end of the third quarter BP’s net debt was equivalent to a gearing level of 15.0%, within the company’s target range of 10% to 20%.
“We are maintaining our strong financial framework, with both a conservative level of gearing and a strictly disciplined approach to investment,” commented Brian Gilvary, BP Chief Financial Officer. “This provides resilience through periods of oil market volatility.”
BP’s Upstream segment reported underlying pre-tax replacement cost profit of $3.9 billion for 3Q 2014 compared with $4.4 billion a year earlier. This result reflected the negative impacts of lower oil prices, partly offset by higher gas prices and increased production from key higher-margin regions.
BP’s total reported oil and gas production for the quarter averaged 3.1 million barrels of oil equivalent a day (mmboed). Excluding Russia, underlying oil and gas production grew strongly, by 4.1% compared with the third quarter of 2013. Reported production excluding Russia was 2.1 mmboed, 2.7% lower than the third quarter of 2013 due primarily to the expiry of an Abu Dhabi concession in January 2014.
BP reported underlying net income from Rosneft for the quarter of $110 million compared with $808 million a year earlier. The depreciation of the rouble against the dollar over the period had a significant impact on the result, together with lower Urals oil prices and associated duty tax lag effects.
The Downstream segment reported underlying pre-tax replacement cost profit for the quarter of $1.5 billion compared with $0.7 billion a year earlier. The improvement was driven by a stronger refining environment as well as an increased contribution from supply and trading activities.
In exploration, three oil discoveries have been made since mid-year: Vorlich in the central UK North Sea, Xerelete in Brazil’s Campos basin, and Guadalupe in the deepwater US Gulf of Mexico.
“These three discoveries come after successful wells in Angola and Egypt earlier in the year. This builds on 2013, our best year for exploration drilling in a decade, and demonstrates our success in rebuilding the momentum of our exploration programme,” said Dudley.
The start-up of the Kinnoull project in the UK North Sea is now in progress – the sixth major upstream project start-up in 2014. The Sunrise project in Canada is also scheduled to begin operations before the end of the year. In addition, production at the Rhum gas field in the UK North Sea has recommenced following implementation of a temporary management scheme with the UK government.
The total cumulative pre-tax charge for the Gulf of Mexico oil spill remained at $43 billion at the end of the quarter.
In September 2014, the district court in New Orleans ruled that, under the US Clean Water Act (CWA), the discharge of oil was the result of gross negligence and wilful misconduct by BP Exploration & Production Inc (BPXP) and that BPXP is therefore subject to enhanced civil penalties. BP intends to appeal this ruling.
During the quarter, increased costs for claims administration, natural resource damage assessment and business economic loss claims eliminated the remaining unallocated headroom in the $20 billion trust. Subsequent costs over and above that provided within the trust will be charged to the income statement; $25 million was charged in the third quarter. The aggregate remaining cash balance in the trust and qualified settlement funds at the end of the quarter was $6.0 billion.