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Highlights:
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BP PLC reports that weak refining margins and lower oil prices are impacting its third-quarter results.
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The company anticipates exploration write-offs between £200-300 million, contributing to reduced financial performance.
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Oil and gas production is projected to remain flat compared to the previous quarter, with varying impacts from gas and oil operations.
BP PLC {LSE:BP} has announced that its third-quarter financial performance will be negatively affected by weak refining margins and declining oil prices. The oil and gas giant has indicated that exploration write-offs in the range of £200-300 million will also contribute to the anticipated downturn in its financial figures.
For the three-month period, BP expects oil and gas production to be broadly flat compared to the previous quarter. While higher gas prices are expected to provide a boost of approximately $100 million, this will be countered by a decline of $100-300 million from operations in the Gulf of Mexico and the UAE.
In a similar vein to recent statements from Shell, BP highlighted the impact of weakened refining margins, which are projected to reduce earnings by approximately $400-600 million. Additionally, oil trading has also faced challenges, contributing to the overall decline in profitability.
As a result of these factors, BP anticipates an increase in net debt by the end of the quarter. This rise in debt is primarily attributed to lower contributions from refining activities, coupled with around $1 billion in divestment proceeds that are set to be carried over into the fourth quarter.
BP reported an average Brent sale price of $80.34 per barrel in the third quarter of 2024, down from $84.97 per barrel in the preceding quarter. Meanwhile, Henry Hub gas prices averaged $2.15 per million British thermal units (mmBtu), an increase from $1.89/mmBtu. Refining margins also experienced a decline, falling to $16.5 per barrel compared to $20.6 per barrel in the prior quarter.
According to the company’s operational guidelines, each $1 per barrel movement in crude prices affects operating profits by approximately $340 million. Similarly, each $0.1 per mmBtu change in Henry Hub gas prices impacts profits by around $30 million, while shifts in refining margins affect operating profits by about $400 million.
