BP swings back into profit after bruising second quarter

Bernard Looney in Downing Street

Bernard Looney in Downing Street

BP has had a turbulent few months.

BP's shares are down more than 50% this year and remain near 25-year lows, battered by weak oil prices and investor concerns about BP's ability to successfully shift to renewable energy from fossil fuels.

It continues to plan a total of 10,000 job cuts, mostly by the end of this year.

The vast profits from its massive oil trading operation, which cushioned Q2's results, fell back significantly amid softening market volatility, while the continued drag in demand for fuel has crushed margins from refining crude to historic lows.

The coronavirus crisis will however not slow BP's transition plans, Chief Financial Officer Murray Auchincloss told Reuters.

Earlier this year, the demand for oil was so low that some sellers in the United States were paying buyers to take it off their hands. The company warned of a "volatile and challenging trading environment" where "the shape and pace of the recovery is uncertain". "People are buying more consumables at our sites".

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British energy giant BP on Tuesday reported a net loss of $450 million for the third quarter, down very sharply on the previous quarter's mammoth losses due to the coronavirus pandemic. After cutting the dividend in August, reducing debt is necessary to give investors confidence that the payout is now sustainable.

"Probably the most significant achievement chalked up in the period was the reduction in net debt, with the divestment of its petrochemicals business to Ineos expected to provide a further injection of funds in the near future".

"It is hard to imagine the environment being much more brutal than it was in the third quarter", Auchincloss said, even if the fourth quarter "is not materially different". However, the CFO added that buybacks redirecting capital expenditure into its low-carbon business remains higher up in the priority list.

Third-quarter results beat a consensus forecast of a £90million loss, and are a considerable improvement on April-to-June's £5.1bn wipeout, which saw dividends - until recently the third largest in the FTSE 100 - slashed for the first time in a decade.

BP's trading division, which last quarter brought in "exceptionally strong results", wasn't able to cushion the blow this time around.

BP's refining margin of $6.20 per barrel was up slightly from the previous quarter but less than half of what it was a year earlier. Trading had provided a bright spot in the previous quarterly earnings for BP, Royal Dutch Shell PLC and Total SE, but lower volatility in the quarter ended September 30 reduced trading opportunities.

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