BP turns in a quarterly profit despite drop in oil trading results

BP managed to turn in a profit of $0.1bn on a replacement cost basis, despite a "significantly" lower result in its oil trading arm, following the prior quarter's $6.7bn loss.

The oil major credited the absence of big write-offs together with a recovery in oil and gas prices, and demand, for the improvement in its bottom line, although it posted a significantly lower oil trading result

On a reported basis, the oil major posted -$0.5bn of red ink for the quarter, which nevertheless compared favourably with the $16.8bn in losses that it turned in during the preceding quarter.

Proceeds from asset sales rose to $0.6bn during the quarter with management adding that it had already completed or agreed disposals worth close to half its $25bn target for over 2025.

The company also made further progress on its goal of achieving $2.5bn in annual cash cost savings by end-2021 versus 2019 levels.

Organic capital expenditures year-to-date were running at $9.1bn, in-line with its full-year target for about $12bn.

Operating cashflows meanwhile proved resilient, coming in at $5.3bn when payments linked to the Gulf of Mexico oil spill are excluded.

On a post-tax basis, those payments amounted to approximately $100m.

Net debt at quarter end stood at $40.4bn, which was down $0.5bn on the prior quarter and was expected to further reduce in the final three months of 2020 as the firm received the proceeds from its divestments.

Michael Hewson, chief market analyst at CMC Markets UK, hailed the company's ability to turn in a quarterly profit, but said that BP's ability to dodge the first back-to-back quarterly losses in over a decade "can’t disguise the challenges facing the industry".

In terms of the outlook, BP said the shape and pace of the global economic recovery was "uncertain" and would depend on the pandemic.

However, the gradual improvement in oil demand appeared set to continue, led by Asia, assuming continued OPEC+ compliance with its own output curbs would be another.

So too, prices for natural gas were expected to remain supported as US gas supplies continued declined.

Refining margins on the other hand were expected to remain "challenging" to high inventory levels and flattening demand for gasoline and jet fuel.

A dividend of 5.25 cents was declared for the quarter just finished.

-- More to follow --