BP Profit Falls On Weak Oil Prices, May Slow Share Buybacks
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BP Plc posted the lowest quarterly profit since the start of the pandemic as declining oil prices knocked its balance sheet off-kilter.
The U.K.-based supermajor also hinted that it could reduce the cadence of its share buybacks from $1.75 billion per quarter starting early next year.
BP’s U.S.-listed shares closed down 5% at $29.35 per share on Oct. 29.
BP approved another $1.75 billion share buyback program for the current quarter and reiterated its previous goal to repurchase at least $14 billion in shares through 2025.
However, the company plans “to review elements of our financial guidance, including our expectations for 2025 share buybacks” when BP considers medium-term plans in February 2025, CFO Kate Thomson said on an Oct. 29 conference call.
“Back in February this year, when we guided on $14 billion, we said that was around market conditions as they were in February,” Thomson said, “and we also said that it's at least 80% of surplus [free cash flow].”
European Brent crude prices fell by more than 11% to an average $74.02/bbl in September from $83.48/bbl in February, according to U.S. Energy Information Administration figures.
BP realized an average of $70.22/bbl of liquids production in the third quarter, down from $73.01 in the second quarter.
Analysts at Tudor, Pickering, Holt & Co. said the impending review of BP’s capital returns framework was “not surprising,” given weak crude oil fundamentals and a weakened downstream refining backdrop.
U.S. producers, by and large, have been able to continue returning capital to shareholders through dividends and share buybacks—even in this lower commodity price environment. But analysts and investors have questioned whether international majors will need to borrow money to keep their financial promises to shareholders.
Third-quarter profit attributable to BP shareholders was approximately $2.27 billion—beating estimates of around $2.05 billion, Stifel analysts said—but down 31% from $3.3 billion during the same quarter last year.
The decrease “mainly reflects lower refining margins and a weak oil trading contribution compared with a very strong result in the same period of 2023,” BP said in an earnings statement.
BP’s net debt also increased to $24.3 billion, compared to $22.6 billion in the previous quarter, due to lower cash flow, higher capex and lower proceeds from divestments.
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U.S. activities
Despite the decrease in earnings, BP reported strong results from its U.S. shale segment and momentum for new projects in the U.S. Gulf of Mexico.
