Falling oil prices meant BP’s update today was never going to produce fireworks. The company has entered a phase of oil prices below $90 that are eroding margins and denting cash generation.
The impact was evident in the oil major’s Q3 update with replacement profit falling to $1.1bn compared to $3.6bn in the same quarter a year ago.
BP’s tough year was reinforced by results for the nine months ending September, showing replacement profit falling to $2.7bn from nearly $15bn in the same period in 2023.
Although the results didn’t make for pretty reading for investors, performance was ahead of analyst expectations, helping to contain any downside in the share price.
“Despite posting its worst quarter in almost four years, the numbers actually came in ahead of analysts’ expectations which should soften the blow for shareholders, with shares are down a modest 1% at time of writing,” said Adam Vettese, market analyst at investment platform eToro.
“Squeezed margins as well as weaker trading have been contributing factors. BP’s transformation strategy to green energy has come under scrutiny and will continue to be under the microscope following today’s update.”
Even though BP’s Q3 results were pretty dismal, some analysts remain upbeat about the stock’s outlook, highlighting exploration opportunities and a change in tack regarding the energy transition.
“Looking further ahead, bp is investing cleverly, pressing on with attractive exploration and development opportunities from Azerbaijan and Iraq through to the US Gulf,” said Derren Nathan, head of equity research, Hargreaves Lansdown.
“It’s also taken full ownership of both leading Brazilian biofuel producer Bunge Bionergia and its solar operation Lighsource bp. All in all, bp is taking a balanced approach to the energy transition, continuing to selectively add new sources of production whilst focussing on the higher-returning areas of renewable development. The current weakness in the shares represents something of an opportunity, but if net debt takes much longer to resume its downward trajectory investors are likely to remain cautious.”