BP (NYSE:BP) posted a 30% drop in Q3 profit to $2.3 billion, the lowest in nearly four years as softer refining margins and oil trading results continue to weigh on the company’s performance.
For the three-month period, BP’s underlying replacement cost profit, its preferred measure for net income, came in at $2.27 billion. This exceeded analysts’ forecasts of $2.05 billion, based on a company survey, but it fell from $2.8 billion in the previous quarter and $3.3 billion a year ago.
This is BP’s weakest result since the final quarter of 2020, when profits plummeted amid pandemic-related disruptions.
BP’s US-listed shares fell around 1% in premarket trading Tuesday.
BP’s oil and gas production increased by 3% year-over-year to 2.38 million barrels of oil equivalent per day, partially offsetting weaker refining margins and less robust oil trading results. While higher natural gas prices lifted earnings, BP noted that gas trading was average over the quarter.
Net debt rose to $24.3 billion from $22.6 billion at the end of June, primarily due to BP’s acquisition of the remaining 50% stake in its solar venture Lightsource BP.
The company’s gearing ratio, or debt-to-market capitalization ratio, increased to 23.3% from 20.3% a year ago.
Commenting on the report, Barclays (LON:BARC) analysts said BP’s above-consensus Q3 net income “is welcome with upstream and customer business performing well and an unexpected gain in the corporate line.”
“Yet the performance of the products business is disappointing and debt increased this quarter,” they added.
BP held its dividend steady at 8 cents per share, following an increase last quarter. It also maintained its share buyback rate at $1.75 billion over the next three months, committing to sustain this pace for an additional quarter.
However, it has also noted that it plans to review elements of its guidance at the February 2025 CMD, which includes expectations for 2025 stock buybacks.
“Given the weaker macro, we continue to anticipate a cut into next year, however we also expect BP to walk away from its ‘surplus payout ratio’ guidance and move towards the rest of the sector on a CFFO payout, which would also allow more room for de-leveraging,” RBC (TSX:RY) Capital Markets analysts commented.