BP profits hit by plunging oil price; announces capex cuts

BP has reported a sharp fall in third quarter underlying replacement cost (RC) profit to $1.819bn (£1.2bn) from $3.03bn in 2014 as the company revealed the impact of plunging oil prices over the last year.

The oil giant also set out plans for maintaining dividend payments through more cuts in capital expenditure and costs as it sought to “balance its organic sources and uses of cash” by 2017 in an $60 per barrel Brent oil price environment.

Underlying RC profits for the first 9 months of the year fell to $5.8bn from $9.9bn.

BP said capital expenditure would come in at $17bn-$19bn a year up to to 2017, although this year the figure would be closer to $19bn.

It said capex cuts would come through “optimising project economics, phasing spending and … industry deflation”. The new forecasts for expenditure come against expectations for 2015 of $24-26bn a year ago and less than $20bn in the second quarter of 2015.

The company also said that it had booked a pre-tax charge of $426m for the quarter relating to the 2010 Deepwater Horizon Gulf of Mexico oil spill which killed 11 workers. The total for the year so far relating to the disaster was $11.5bn.

Chief executive Bob Dudley said the results of action taken last year to prepare the company for the impact of lower oil prices “are coming through well”.

“We are now in action to rebalance our financial framework in this new price environment,” he said.

"I am confident that BP's strong and well-balanced portfolio of businesses and projects gives us the ability to grow value into the future. All of this underpins our strong priority of sustaining our dividend and then growing free cash flow and shareholder distributions over the long term."