BP. Bp Plc

By Sarah McFarlane and Giulia Petroni 

This article is being republished as part of our daily reproduction of WSJ.com articles that also appeared in the U.S. print edition of The Wall Street Journal (October 30, 2019).

BP PLC said it swung to a loss in third-quarter earnings resulting from a divestment-related charge and lower earnings in its exploration and production business.

The London-based energy giant Tuesday 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 analyst expectations, with the underlying replacement-cost profit 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 its underlying replacement-cost profit was $3.84 billion.

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

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

Oil companies' earnings have been hit by weaker oil and gas prices. Last week, Norway's Equinor ASA and Italy's Eni SpA announced declines in their third-quarter earnings, citing lower energy prices.

BP shares closed down 3.8% in London on Tuesday.

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

The company had flagged its impairment charge of $2.6 billion related to divestments earlier this month, 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 accounted for about $1 billion of the impairment charge.

The impairment also increased gearing -- the ratio of BP's market cap to debt -- to 36% including leases. It is above the company's target range of 20-30%, but BP said it should be temporary and gearing should fall to the middle of that range in 2020 as the company reduces debt.

The company said 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 for the same period a year ago. The contribution from Rosneft Oil Co. was more resilient however, at $802 million, down from $872 million a year ago.

Operating cash flow, excluding payments relating 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.

Write to Sarah McFarlane at sarah.mcfarlane@wsj.com

(END) Dow Jones Newswires

October 30, 2019 02:47 ET (06:47 GMT)

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