The embattled boss of BP has insisted he can deliver a long-awaited turnaround of the energy major even if the price of oil falls, after pivoting back towards fossil fuel production.
The FTSE 100 constituent was boosted by higher oil and gas production and a recovery in refining margins over the third quarter. Adjusted profits of $2.2 billion were down from $2.3 billion a year earlier, but above the $2.02 billion that City analysts had forecast.
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Oil and gas production was broadly flat on an annual basis at 2.36 million barrels of oil equivalent a day, although the average realised price for Brent Crude fell 14 per cent to $69.13 a barrel.
“We have a very defensive portfolio for a downside environment,” Murray Auchincloss, BP’s chief executive, said. He pointing towards its refining operations, which can benefit from a lower oil price, and its trading arm. “In the event [the] price does fall, we have lots of flexibility on capital.”
BP, which is one of the world’s largest oil and gas producers, is battling to reduce its debt and fund $14.5 billion in spending on its projects this year, while maintaining a pledge to return between 30 and 40 per cent of cashflow from its operations to shareholders.
The Opec+ cartel has been steadily unwinding production cuts that have been in place since 2022, which has raised fears that a supply glut could materialise. The outlook for the oil price has been complicated by the stockpiling of oil by China and further sanctions on Russian oil.
Demand for oil is expected to grow by about 1 per cent over both this year and next, but supply remained “very difficult to predict”, Auchincloss, 55, said.
Murray Auchincloss
KAYLEE GREENLEE/REUTERS
The group will press ahead with another $750 million in share buybacks before the end of the year and has declared a quarterly dividend of 8.32 cents a share, up from 8 cents a share.
Auchincloss “fundamentally reset” the group’s strategy this year by abandoning a target to reduce fossil fuel production and setting a goal to raise $20 billion from divestments by 2027, in an effort to bring leverage down.
Disposals are on track to raise more than $4 billion this year, higher than a previous range of between $3 and $4 billion. This week BP agreed to sell minority stakes in some of its onshore oil and gas pipeline assets in the United States for $1.5 billion.
However, there was no update on the sale of its Castrol lubricants business, which forms the centrepiece of its disposal programme. Auchincloss said there had been “lots of interest” in the 126-year-old business since the sales process formally kicked off in May.
“We’re not concerned about the $20 billion, we’re not concerned about the debt reduction to $14 to $18 billion,” he said. “We remain confident in our progress in this space.”
The company has been boosted this year by news of a potentially massive oil discovery off the coast of Brazil, as well as by a recent arbitration win against Venture Global, an American LNG producer, that could see it receive a substantial damages payout.
The decision to unwind the series of targets set out in 2020 by Auchincloss’s predecessor, Bernard Looney, came a month after it emerged that Elliott Investment Management, the feared New York activist investor, had built a 5 per cent stake in BP.
The shares, which have risen almost 14 per cent since the start of this year, were down 0.2 per cent in mid-morning trading in London on Tuesday.