--BP swung to 3Q replacement-cost loss of $351 million from $3.09 billion profit a year earlier

--Underlying replacement-cost profit of $2.25 billion beat a company-compiled consensus

--Revenue fell to $62.29 billion from $80.80 billion amid weaker oil and gas prices

 
   By Sarah McFarlane and Giulia Petroni 
 

BP PLC (BP.LN) said Tuesday that it swung to a loss in third-quarter earnings as it reported a divestment-related charge as well as lower upstream earnings.

The London-based energy giant posted a replacement-cost loss--a metric similar to the net-income figure that U.S. oil companies report--of $351 million for the three months ended Sept. 30 compared with a profit of $3.09 billion in the year-earlier period.

Stripping out the one-off items, BP's results exceeded analysts' expectations, with the underlying replacement-cost profit--the company's preferred metric--at $2.25 billion, above a company-compiled consensus of 24 brokers' estimates forecasting $1.73 billion. Still, the result was well below the same period last year when BP's underlying replacement-cost profit was $3.84 billion.

Oil companies' earnings have been hit by weaker oil and gas prices. Last week, Norway's Equinor ASA (EQNR.OS) and Italy's Eni SpA (ENI.MI) both reported a fall in earnings for the third quarter, citing lower energy prices.

BP shares were down about 0.6% in early trading in London.

BP's production was also hit by maintenance activities in some of the company's highest-margin regions, as well as Hurricane Barry in the Gulf of Mexico, which shut down facilities for about 14 days, the company said.

The impairment charge of $2.6 billion related to divestments had been flagged earlier this month by BP, having sold U.S. assets at lower prices than expected. In the quarter, BP sold its Alaska assets to privately held Hilcorp Energy Co. for $5.6 billion. The sale resulted in around $1 billion of the impairment charge.

The impairment also increased gearing--the ratio of BP's market capitalization to debt--to 36% including leases. This is above the company's target range of 20-30%, but BP said this should be temporary and that gearing should fall to the middle of that range in 2020 as the company reduces debt. BP said that it expects to complete its $10 billion divestment program ahead of schedule, by the end of this year instead of 2020. Divestments made this year totaled $7.2 billion by the end of the third quarter.

Total revenue for the third quarter was $62.29 billion compared with $80.80 billion the previous year, BP said. The company reported a net loss of $749 million.

Underlying replacement-cost profit before interest and tax in the upstream business--which produces oil and gas--fell to $2.14 billion from $4 billion last year. The contribution from Rosneft Oil Co. (ROSN.MZ) was more resilient however, at $802 million, down from $872 million the same period a year ago.

BP's results exceeded market expectations due to better-than-expected downstream and Rosneft contributions, Bernstein analyst Oswald Clint said. BP holds around a 20% stake in Russia's Rosneft.

Looking ahead, BP said it expects fourth-quarter production to be higher thanks to the completion of seasonal maintenance and turnaround activities.

Operating cash flow, excluding payments related to the 2010 Deepwater Horizon oil spill, was $6.5 billion, while net debt rose to $46.5 billion, BP said. The company paid roughly $400 million in connection to the oil spill in the Gulf of Mexico as part of a $20 billion settlement with the U.S. government in 2015.

BP maintained its quarterly dividend at 10.25 cents a share.

"We think some investors have been calling for a dividend-per-share increase in the near term, however, given where the balance sheet stands, this is a prudent step in our view," said Biraj Borkhataria, co-head of European energy research at RBC Capital Markets.

 

Write to Sarah McFarlane at sarah.mcfarlane@wsj.com and Giulia Petroni at giulia.petroni@wsj.com

 

(END) Dow Jones Newswires

October 29, 2019 05:07 ET (09:07 GMT)

Copyright (c) 2019 Dow Jones & Company, Inc.
Bp (LSE:BP.)
Historical Stock Chart
From Feb 2024 to Mar 2024 Click Here for more Bp Charts.
Bp (LSE:BP.)
Historical Stock Chart
From Mar 2023 to Mar 2024 Click Here for more Bp Charts.