BP profit falls as company takes hit from asset sales

Company declares first loss in three years as it takes a one-off, $2.6bn hit related sell-offs

BP revised its long term forecast for Brent crude prices downwards to $55 per barrel. AFP

BP's profit fell sharply in the third quarter, hurt by lower oil prices, but strong refining operations helped the company beat expectations even after taking a one-off charge of $2.6 billion (Dh12.23bn) linked to large asset sales.

The British oil company made its first net loss in more than three years due to the charge, but its underlying performance remained strong.

Cash flow from operations was unchanged in the quarter from a year earlier at $6.1bn despite a 17 per cent drop in oil prices.

"BP delivered strong operating cash flow and underlying earnings in a quarter that saw lower oil and gas prices and significant hurricane impacts," chief executive officer Bob Dudley said.

The $2.6bn charge will not come as a surprise to investors after BP flagged earlier this month it would take a non-cash charge of $2bn to $3bn in the quarter as it gets closer to disposing of assets worth $10bn by the end of 2019, a year ahead of schedule.

As a result, the company reported a net loss of $700 million, its first since the second quarter of 2016.

So far this year, BP's proceeds from divestments reached $1.4bn.

BP last year acquired BHP's US shale assets for $10.25bn in a deal that turned it into one of the largest shale oil drillers. It announced the sale of its Alaskan business to Hilcorp Energy for $5.6bn.

"Today's Q3 numbers were not expected to come in close to the levels seen in Q2 given the decline in oil prices seen since then, however, they still show a company that is nimbler and more efficient than it was a decade ago," said Michael Hewson, chief market analyst at CMC Markets.

BP shares were down 0.7 per cent shortly after trading opened in London.

Third-quarter underlying replacement cost profit, the company's definition of net income, fell 40 per cent from the year earlier period to $2.3bn. That exceeded a forecast of $1.73bn in a company-provided survey of analysts and compared to $2.81bn in the second quarter of the year.

Oil and gas production, excluding BP's share from its 19.75 per cent stake in Russia's Rosneft, was down 2.5 per cent from a year earlier at 2.56 million barrels of oil equivalent per day as a result of maintenance at several high-margin fields and a two-week disruption to production in the US Gulf of Mexico from Hurricane Barry.

BP said production in the fourth quarter would be higher than in the previous quarter as maintenance winds down.

The weakness in oil and gas production was offset by a strong performance in its refining and chemicals businesses, higher than expected earnings from Rosneft, which helped lower BP's tax rate.

Weaker oil prices in the third quarter from a year earlier also weighed heavily on profits of other energy companies including Italy's Eni and Norway's Equinor.

BP earlier this month said Mr Dudley would retire next year following a tumultuous decade at the helm of the company. He will be succeeded byBernard Looney, 49, BP's head of upstream.