BP third quarter profits cut in half but beat forecasts

Underlying third-quarter profits halved at BP compared to last year but the fall was not as bad as feared as the oil colossus continues to chip away at costs.

Although down 49% on last year due to lower oil prices, currency effects and one-off events hitting production levels, underlying replacement cost profits of $933m in the three months to the end of September were well ahead of the consensus forecast of $720m.

Cost-cutting helped, with cash costs over the past four quarters down $6.1bn compared to two years ago.

"We continue to make good progress in adapting to the challenging price and margin environment," said chief financial officer Brian Gilvary. "We remain on track to rebalance organic cash flows next year at $50 to $55 a barrel, underpinned by continued strong operating reliability and momentum in resetting costs and capital spending.

The Brent oil price averaged $46 a barrel in the quarter, compared with $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.

Reported profits were up $1.66bn from $1.23bn a year ago and the FTSE 100 company announced an unchaged quarterly dividend of 10 cents per share, which will be paid on 16 December with the sterling translation to be calculated by 6 December.

Total production for the quarter was 5.9% lower and underlying production fell 2% to 2,110m barrels of oil equivalent per day, with the main factors being maintenance activities, the impact of weather and the outage from the Pascagoula gas plant fire in the Gulf of Mexico.

For the first nine months of the year, total and underlying production of 2,209mboe/d was broadly flat versus the same period in 2015.

Looking to the final quarter of the year, BP said it expected production to be slightly higher than the third quarter, mainly reflecting recovery from planned seasonal turnaround and maintenance activity.

Expectations for full year organic capital expenditure were reduced to $16bn, compared to original guidance of $17-19bn given at the start of the year. For 2017 guidance is for $15-17bn.

With $2.7bn of cash divestments over the year to date, gearing at the quarter end was 25.9%.