BP shares fall to lowest since 2022 after sharp drop in the oil major’s third-quarter profit

Energy
Wednesday, October 30th, 2024 5:32 pm EDT

BP reported its weakest quarterly earnings in nearly four years, attributing the decline to falling crude prices and lower refining margins. For the third quarter of 2024, the British oil major posted an underlying replacement cost profit of $2.3 billion, surpassing analyst expectations of $2.1 billion, but marking a significant drop from the $3.3 billion net profit reported in the same quarter the previous year. This performance was the lowest since late 2020, when profits plummeted during the pandemic. BP’s shares fell over 4%, reaching their lowest level since July 2022, reflecting ongoing investor skepticism about the company’s investment viability.

Despite the challenging environment, BP maintained its dividend at 8 cents per share and announced plans for a $1.75 billion share buyback over the next three months. However, the company cautioned that it would review its financial guidance and expectations for future share buybacks as part of its medium-term strategy update in February. Analysts have predicted a potential reduction in shareholder returns for the upcoming year, suggesting a shift towards a more cautious approach aligned with industry standards regarding cash flow from operating activities (CFFO).

The report indicated an increase in BP’s net debt, which rose to $24.3 billion due to lower operating cash flow and higher capital expenditures. Oil prices had fallen more than 17% in the third quarter, exacerbating concerns over global oil demand and contributing to BP’s weakened profit margins. John Moore, a senior investment manager, noted that challenging trading conditions had significantly impacted BP’s earnings compared to the previous year. This situation was compounded by the costs associated with the company’s ongoing restructuring efforts aimed at simplifying its operations.

In a noteworthy strategic shift, BP reportedly scrapped its commitment to reduce oil and gas production by 2030, suggesting a prioritization of short-term returns from fossil fuel operations. This decision has drawn criticism as it undermines the company’s previous commitments to achieving net-zero emissions by mid-century. BP is now focusing on increasing investments in the Middle East and Gulf of Mexico to enhance oil and gas output. A spokesperson emphasized that while the company’s overall direction remains unchanged, it aims to operate as a simpler, more focused entity.

As BP navigates these turbulent waters, it faces pressure from investors and market analysts to clarify its strategic financial priorities. The forthcoming quarterly results from other major oil companies, including Shell and TotalEnergies, will be closely watched for additional insights into the broader industry dynamics amid fluctuating oil prices and shifting market demands.

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