BP has reported a profit for the third quarter of 2016 of US$933 million on an underlying replacement cost basis.1 This compares to US$720 million profit for the previous quarter and US$1.8 billion for the third quarter of 2015.
This compares to US$720 million profit for the previous quarter and US$1.8 billion for the third quarter of 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 flow2, which excludes pre-tax Gulf of Mexico payments, was US$4.8 billion for the quarter. It was US$13.3 billion for the first nine months of the year, benefitting from reliable operations and lower cash costs.
BP announced an unchanged dividend for the quarter of 10c per ordinary share, expected to be paid in December.
Brian Gilvary, BP’s Chief Financial Officer said: “We continue to make good progress in adapting to the challenging price and margin environment. We remain on track to rebalance organic cash flows next year at US$50 to US$55 a barrel, underpinned by continued strong operating reliability and momentum in resetting costs and capital spending.3
“At the same time we are investing in the projects, businesses and options to deliver growth in the years ahead.”
BP’s cash costs4 over the past four quarters were US$6.1 billion lower than in 2014, continuing the Group’s progress towards 2017 cash costs being US$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 US$16 billion, compared to original guidance of US$17 - 19 billion given at the start of the year. BP expects capital expenditure in 2017 to be between US$15 billion and US$17 billion.
Cash divestment proceeds for the year to date, including the partial sale of BP’s shareholding in Castrol India, are now US$2.7 billion. At the end of the third quarter, BP’s gearing level was 25.9%, within the targeted 20-30% range.
The Brent oil price averaged US$46 a barrel in the quarter, compared with US$50 a barrel in 3Q 2015, and gas prices outside the US were also weaker. Refining margins were steeply down from a year earlier, depressed by high product stock levels.
BP reported an overall headline profit for the quarter of US$1.6 billion, which includes a net gain of US$728 million for non-operating items and fair value accounting effects. This is comparable to a profit of US$46 million a year earlier and a loss of US$1.4 billion in the second quarter of this year, when significant charges associated with the Gulf of Mexico oil spill were taken.
Both of BP’s main operating segments continued to demonstrate strong operational performance, with Upstream plant reliability at 95% and refining availability in Downstream at 95.4% in the first three quarters of the year.
BP’s Downstream segment delivered resilient results despite refining margins weaker than both the previous quarter and, particularly, a year earlier. Underlying pre-tax replacement cost profit was US$1.4 billion, compared with US$1.5 billion for 2Q 2016 and US$2.3 billion for 3Q15. Compared with a year earlier, the impact of the lower refining margin environment was partially offset by an increased retail performance and cost reductions across the segment.
BP’s Upstream segment reported an underlying pre-tax replacement cost loss of US$224 million, compared with profits of US$29 million for 2Q16 and US$823 million for 3Q15. 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 programmes in the Upstream.
BP estimated its share of Rosneft net income for the third quarter to be US$120 million5, compared with US$246 million for 2Q16 and US$382 million for 3Q15. In July BP received a dividend of US$332 million, representing 35% of BP’s share of Rosneft’s 2015 IFRS net income.
In the Upstream, BP announced an agreement for a second production sharing agreement with CNPC for shale gas in China and also amendment of a number of concessions in Egypt that enabled the fast-track development of the Nooros field.
In September, BP and Det Norske completed the formation of their Norwegian joint venture. On completion of the sale of BP Norge, BP received a 30% equity interest in Aker BP.
The In Amenas Compression project in Algeria is on schedule to commence operation in the fourth quarter, which would make it the fifth Upstream major project to start this year.
In October, BP announced its decision not to continue its exploration programme in the Great Australian Bight, off the south coast of Australia.
In the Downstream, BP continues to see marketing growth with retail volumes increasing by 3% in the year to date and two new convenience partnerships in Europe.
For further information please visit:http://www.bp.com/en/global/corporate/press/press-releases/third-quarter-2016-results.html
- Underlying replacement cost profit is adjusted for non-operating items and fair value accounting effects.
- Underlying operating cash flow is net cash provided by operating activities excluding pre-tax amounts related to the Gulf of Mexico oil spill.
- BP’s objective is to rebalance organic sources and uses of cash by 2017 at average Brent oil prices in the range of US$50-55 per barrel.
- Cash costs are the principal operating and overhead costs that management considers to be the most directly under their control; see www.bp.com for further information.
- The operational and financial information for the Rosneft segment for the third quarter of 2016 is based on preliminary operational and financial results of Rosneft for the three months ended 30 September 2016. Actual results may differ from these amounts.
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