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| BP’s earnings fall short of expectations as low gas prices hurt Q3 results |
British Petroleum (BP) announced its third-quarter earnings today, reporting a profit of $3.3 billion. However, these results fell short of analysts' expectations, primarily due to a $540 million write-off related to its offshore wind projects in the United States. While gas sales were weak, strong performances in oil trading and refining margins partially offset these losses.
BP remains steadfast in its dividend policy, maintaining it at 7.27 cents per share. Furthermore, the company extended its share buyback program by $1.5 billion over the next three months, indicating its confidence in its distribution policy.
Despite these reassurances, BP's shares dipped by 5.4% in early trading, outpacing a broader 1.25% decline in a European energy company index. The write-off on its offshore wind projects off the coast of New York, compounded by Norwegian Equinor's $300 million impairment charges, seems to have unnerved investors.
BP paid Equinor $1.1 billion in 2020 for a 50% stake in the Empire and Beacon offshore wind projects, boasting a combined capacity of 3.3 gigawatts. These projects were designed to power two million homes, but issues with New York's approval and terms have cast a shadow of uncertainty on their future.
RBC analyst Biraj Purkataria commented on BP's overall performance, stating that profits across all divisions have been impacted. Manufacturing sector earnings stood at $2.1 billion, lower than the $2.4 billion average, despite robust oil trading results. This decline is indicative of weak refining profit margins experienced during the third quarter.
This financial downturn aligns with the broader trend in the energy sector, where competitors like Chevron and Exxon Mobil reported sharp year-over-year declines in third-quarter profits due to falling energy prices. Shell is yet to announce its results later this week.
Amid these challenges, BP remains resolute in its strategic direction, following the departure of former CEO Bernard Looney. BP's third-quarter earnings, while below expectations, reflect higher oil and gas production, strong refining margins, reduced refinery maintenance, and a "very strong oil trading result." However, natural gas marketing and trading weakened due to a lack of market volatility.
The company's Q3 earnings, defined as core replacement cost earnings, were $3.3 billion, falling short of the $4 billion forecast provided to analysts. These results are in stark contrast to the $8.15 billion generated in the third quarter of 2022, when energy companies reaped the benefits of high oil and gas prices.
Looking forward, BP expects capital spending of $16 billion this year, at the lower end of its $16-$18 billion range. However, it anticipates significantly lower refining industry margins in the fourth quarter compared to the third quarter. Despite the headwinds, BP remains committed to its strategic vision, even as the search for a permanent CEO continues.
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