BP posted a record quarterly net profit on Friday, beating expectations as the Iran war boosted energy prices and refining margins.
The results follow high earnings from Shell and TotalEnergies, which also beat quarterly profit expectations on Thursday and chose to raise share buybacks with their cash.
BP reported third-quarter underlying replacement cost profit – its version of net income – of $8.46 billion, compared with analysts' expectations of $7.33 billion in a company-provided poll, and $2.2 billion a year earlier. It was the highest quarterly net profit posted under BP's current version of the parameter introduced 18 years ago.
Operating cash flow came in at $14.8 billion, while net debt fell to $13.9 billion, enabling BP to reach its net debt target a year ahead of schedule.
Strategy reset
The milestone marks another step in BP's turnaround after the company reset its strategy in 2025, following an ill-fated push into renewables.
The results are chief executive Meg O’Neill’s second full quarter at the helm and offer a new look at the operational performance that she has identified as a priority. Ms O'Neill, BP’s first outsider chief executive, is cutting costs, selling assets and paying down debt while preparing to lay out her longer-term strategy for the company in December.
“It really was a banner quarter for the refining business,” she told Bloomberg TV. “We had very strong margins from the BP-operated refineries, we also had very strong underlying performance. We were able to capture the opportunity provided by the market.”
BP shares were up 1.2 per cent in early trade, outpacing a 0.1 per cent rise for a broader index of European energy companies. "BP has continued its streak of beating expectations and demonstrating it is highly leveraged to the macro environment," RBC analyst Biraj Borkhataria wrote in a note. "Operational indicators and controllables look strong."
Surplus cash
The Iran war has driven up oil and fuel prices and boosted refining margins, prompting questions over how oil companies will use the additional cash generated by the sector.
BP said it would use part of the surplus cash to settle its remaining liabilities from the 2010 Deepwater Horizon disaster, when a blow-out on the drilling rig over the BP-operated Macondo well in the Gulf of Mexico caused one of the world's worst oil spills and killed 11 people.
The company put aside $69 billion relating to the spill. Related payables and provisions still stand at $5.94 billion, the most recent BP data shows.
All three of BP's business units beat expectations. Its customer and products division delivered the strongest outperformance, reporting pretax profit of $6.95 billion, above analysts' average estimate of $6.3 billion and up from $1.72 billion a year earlier.
BP's refining indicator margin rose to $46.7 per barrel in the quarter from $29.6 per barrel in the second quarter and $15.8 per barrel a year earlier. The company also said it had a significantly higher gas marketing and trading result.
BP recorded $4 billion of impairments this quarter linked largely to transition businesses. In recent months, it wrote down more than $5 billion, mainly related to Archaea, its solar unit Lightsource BP and other low-carbon ventures.
The company is to hold a strategy update on December 15.
