bp posts adjusted third-quarter net income of $3.3 billion

Nov. 15, 2021

After adjusting items of $6.3 billion, bp reported an underlying replacement cost profit, a proxy of net profit, of $3.3 billion for third-quarter 2021, compared with $2.8 billion for the previous quarter and $86 million a year ago.

This result was driven by higher oil and gas realizations, higher refining availability and throughput enabling the capture of a stronger environment and a stronger gas marketing and trading result, partly offset by a higher underlying tax charge. This quarter’s adjusting items included significant adverse fair value accounting effects of $6.1 billion, primarily due to the exceptional increase in forward gas prices towards the end of the quarter.

bp’s operating cash flow was $6 billion in the third quarter, up from $5.2 billion a year ago. This included a working capital build of $1.8 billion after adjusting for inventory holding gains and fair value accounting effects.

The company’s net debt fell for the sixth consecutive quarter to reach $32 billion at the end of the third quarter and has now been reduced by $7 billion since the start of this year.

With second quarter results, bp announced the intention to buyback $1.4 billion of shares from surplus cash flow generated in first-half 2021. This program has been completed, with $900 million executed during the third quarter. bp intends to execute a further buyback of $1.25 billion prior to fourth quarter results.

The oil production segment was responsible for the bulk of the year-over-year improvement as adjusted operating earnings increased to $2.5 billion from $367 million a year ago on higher oil and gas prices. Group production, excluding Rosneft, fell 2% to 2.2 MMboe/d from 2.243 MMboe/d last year on price impacts, entitlement volume impacts, and divestments offset by project start-ups. The recently created gas and low carbon energy segment increased adjusted operating earnings to $1.8 billion from $502 million a year ago thanks largely to higher realizations and very strong trading results. The customers and products segment, formerly the downstream segment, reported adjusted earnings of $1.2 billion compared with $636 million a year ago thanks to a much stronger refining environment.

bp also reported progress on its transition to an integrated energy company, including a 45% increase in electrons sold versus the second quarter in its mobility business amid increases in ultra-fast charging points and higher utilization.

“bp stated it will need to achieve a 10% utilization on its chargers to earn a 10% return, but it is not there as of today. It also grew its renewables pipeline to 23.3 GW from 21.2 GW, all solar, in the second quarter. We expect BP to continue to register sequential improvements in energy transition-related metrics given its ongoing investment. However, near term, given their relative size to the hydrocarbon businesses, commodity prices will remain the primary determinant of earnings and shareholder returns,” said a Morningstar report.