BP returned to a profit in the third quarter as crude prices and energy demand recovered, but warned that the outlook remained volatile.
Underlying profit on a replacement cost basis — the measure of income tracked most closely by analysts — was down 96 per cent to $86m, from $2.3bn in the same period last year, the company said on Tuesday.
But the small profit, which came after the previous quarter’s loss, beat analysts’ forecasts of a loss of $120m.
The company said it benefited from the absence of major exploration write-offs, in contrast with the previous quarter, even though earnings took a hit from “significantly lower” results at its oil trading business.
The pandemic is accelerating an overhaul of BP under its chief executive Bernard Looney, who started in his role in February and promised to transform the company into a net-zero emissions company by 2050.
BP is changing its corporate strategy to fit a lower carbon future and is restructuring its business. Investors, however, have yet to be convinced by the company’s plan, which it announced in August. Its share price has fallen to a multi-decade low. The company has already said it will cut 10,000 jobs.
“Having set out our new strategy in detail, our priority is execution and, despite a challenging environment, we are doing just that,” Mr Looney said on Tuesday. “We remain firmly focused on cost and capital discipline. Importantly, net debt continues to fall.”
The oil sector has been forced into cash conservation mode after governments imposed lockdowns and travel bans to contain the spread of the virus, prompting a collapse in oil demand.
To bolster its finances, BP said in August it would cut the dividend for the first time since the Deepwater Horizon disaster in 2010. The group has also slashed capital spending by billions of dollars, pledged to cut costs, secured new credit lines, issued bonds and deferred exploration activity.
BP plans to sell $25bn in assets by 2025, around half of which the company says have been agreed on, to cut its mountain of debt and pay for its renewables investment plans. Last month, BP made its first foray into offshore wind power, agreeing to buy a 50 per cent stake in two US projects from Norway’s Equinor for $1.1bn.
Although the oil price has recovered from the lows of April — when it fell below $20 a barrel — it is struggling to hold much above $40 a barrel and is still far away from January’s $70 level as new outbreaks of the virus emerge.
“The ongoing impacts of the Covid-19 pandemic continue to create a volatile and challenging trading environment,” said BP. “The shape and pace of the recovery is uncertain, as it depends on the further spread of the pandemic.”
BP added that margins in the refining business “remain challenging” due to bloated stockpiles and a stalled demand recovery for petrol and jet fuel.
BP is the first major oil company to report earnings this week. Italy’s Eni reports its financials on Wednesday, followed by Royal Dutch Shell on Thursday. France’s Total, along with ExxonMobil and Chevron of the US, report on Friday.