BP Plc (ADR) Trading Up, Beats Estimates On Lower Crude

BP’s profit attributable to shareholders was $46 million or $0.02 per ADS, compared to last year’s $1.29 billion or $0.42 per ADS.

BP reported operating cash flow for 3Q 2015 was $5.2 billion bringing the total for the first nine months of the year to $13.3 billion.

BP has hunkered down to cope with a long-term fall in the oil price by slashing costs as it announced a 40% dive in its third-quarter profits.

The oil producer reported better-than-expected third-quarter underlying replacement cost profit, the company’s definition of net income, of $1.8 billion, compared with analysts’ consensus of $1.2 billion. We are now in action to rebalance our financial framework in this new price environment.

The group lowered its full-year 2015 capital-spending forecast to less than $20 billion. This was also up from $1.3bn from the previous quarter, but down from $3bn in the third quarter of 2014.

Oil company shares have come under pressure as investors fear the persistently low oil price could force a cut in dividends. BP said it would further lower its spending to $17 billion to $19 billion by 2017.

BP also revealed that the cost of the Deepwater Horizon disaster has now reached $55bn (£35.85bn).

To meet these costs, it is selling off assets, and expects to divest $10bn this year, with another $3bn-$5bn in 2016.

‘Quite apart from the ongoing weakness in the oil price, where BP has put a marker in the sand of 60 dollars on which to base its future estimates, its exposure to Russian Federation and the Gulf of Mexico situation – not yet consigned to the history books – remain important drags on development.

However, BP laid out a strategy to manage the lower oil price environment, planning for an around $60/bbl price for Brent crude until at least 2017 and scheduling $3B-5B worth of asset sales next year. “The plans we have set out will allow us to achieve this without compromising BP’s core growth options”. A year ago, it had budgeted $24 billion to $26 billion for 2015.

BP’s pretax adjusted profit from its downstream segment, which includes refining and trading, jumped to $2.3 billion from $1.5 billion. Settlement agreements between BP and the five Gulf states are contingent upon approval of the consent decree.

“The total amounts that will ultimately be paid by BP in relation to the incident will be dependent on many factors”, BP said.