Oil major BP on Tuesday reported that its underlying performance for the third quarter of 2016 was down compared to the prior-year third quarter due to a weaker price and margin environment.
BP’s third-quarter 2016 replacement cost (RC) profit was $1.66 billion, compared with $1.23 billion a year ago. However, after adjusting for a net gain for non-operating items of $949 million and net unfavourable fair value accounting effects of $221 million (both on a post-tax basis), underlying RC profit for the third quarter 2016 was $933 million, compared with $1.8 billion for the same period in 2015.
The quarter’s result was affected by a weaker price and margin environment. It was also negatively impacted by a number of mainly one-off and non-cash items in the Upstream. However, the result also included benefits from lower cash costs being incurred throughout the Group and a positive one-time tax credit.
Underlying operating cash flow, which excludes pre-tax Gulf of Mexico payments, was $4.8 billion for the quarter.
BP’s cash costs over the past four quarters were $6.1 billion lower than in 2014, continuing the group’s progress towards 2017 cash costs being $7 billion lower than in 2014. BP’s expectation for 2016 organic capital expenditure was reduced again and it is now expected to total around $16 billion, compared to original guidance of $17-19 billion given at the start of the year. BP expects capital expenditure in 2017 to be between $15 billion and $17 billion.
The Brent oil price averaged $46 a barrel in the quarter, compared with $50 a barrel in 3Q 2015, and gas prices outside the US were also weaker.
BP’s Upstream segment reported an underlying pre-tax replacement cost loss of $224 million, compared with profits of $29 million for 2Q 2016 and $823 million for 3Q 2015. Compared with a year earlier, the result reflected weaker oil and non-US gas prices and lower gas marketing and trading results, together with the impact of higher exploration write-offs and rig cancellation charges. The impacts of these were partially offset by benefits of cost reduction program in the Upstream.
Production for the quarter was 2,110mboe/d, 5.9% lower than the third quarter of 2015. Underlying production for the quarter decreased by 2.0%, mainly due to seasonal turnaround and maintenance activities, and the impact of weather and the Pascagoula plant outage in the Gulf of Mexico. Looking ahead, the company expects fourth-quarter reported production to be slightly higher than the third quarter, mainly reflecting recovery from planned seasonal turnaround and maintenance activity.
Offshore Energy Today Staff