How BP Doubled Q3 Profits

Print Email

BP PLC (NYSE: BP) reported third-quarter 2018 results before markets opened Tuesday. The oil and gas supermajor posted adjusted diluted earnings per American depositary share (ADS) of $1.15 on revenues of $80.8 billion. In the same period a year ago, the company reported earnings per ADS of $0.74 on revenues of $60.81 billion. Analysts had estimated earnings per ADS of $0.85 and revenues of $79.86 billion. One ADS is equal to six ordinary shares.

What a difference high oil prices make. BP’s adjusted replacement cost profit (essentially the company’s adjusted net income/loss) in the third quarter totaled $3.09 billion, compared with $1.38 billion in the year-ago quarter. BP posted an unadjusted replacement cost profit of $3.35 billion, $0.93 per ADS, compared with a profit of $1.77 billion and a net profit per ADS of $0.42 in the third quarter of 2017.

CEO Bob Dudley said:

Our focus on safe and reliable operations and delivering our strategy is driving strong earnings and growing cash flow. Operations are running well across BP and we’re bringing new, higher-margin barrels into production faster through efficient project execution. We have made very good progress with our acquisition from BHP and expect to complete the transaction tomorrow. This will transform our position in the US Lower 48 and we expect it to create significant value for BP. This progress all underpins our commitment to growing distributions for our shareholders.

BP’s price realizations for liquids rose from $47.45 a barrel in the third quarter of 2017 to $69.68. Natural gas averaged $2.89 per thousand cubic feet in the year-ago quarter, compared to $3.86 in the third quarter of this year.

Downstream (refining) pretax profits increased by about 3.4% year over year to $2.25 billion. On an adjusted basis, refining profits slipped from $2.34 billion a year ago to $2.11 billion. BP’s refining marker margin was $14.70 a barrel, compared with $16.30 in the year-ago quarter and $14.90 in the second quarter of this year. The outlook for the third quarter calls for lower industry refining margins. BP also expects a significantly higher level of turnaround activity in the second half of the year, particularly at its Whiting, Indiana, refinery.

To date, BP has paid out almost $67 billion in pretax charges related to the disaster that claimed the lives of 11 workers and dumped millions of barrels of crude oil into the Gulf of Mexico in April 2010. In the third quarter, the company paid out a total of $470 million.

BP’s organic capital spending totaled $3.7 billion in the third quarter. For the year to date, capex totals $10.7 billion, down from $11.9 billion in the first nine months of last year.

BP’s ADSs closed down about 0.2% on Monday, at $41.03 in a 52-week range of $36.15 to $47.83. They traded up about 3.8% in Tuesday’s premarket session to $42.57. The 12-month consensus price target was $50.84 before Tuesday’s report.