BP today reported results for the third quarter of 2015 and set out a medium-term financial frame to balance cash flows by 2017 at around $60 per barrel.
BP reported underlying replacement cost profit (1) of $1.8 billion for the quarter, compared with $1.3 billion for the previous quarter and $3.0 billion for the third quarter of 2014. Compared with a year earlier, the result primarily showed the impact of sharply lower oil and gas prices but also the benefits of a continuing strong downstream environment and performance and steadily lower cash costs throughout the Group.
Group chief executive Bob Dudley and chief financial officer Brian Gilvary will later today describe to investors the company’s response to lower oil prices and how it expects to balance its organic sources and uses of cash (2) by 2017 in an around–$60 per barrel Brent oil price environment. They will also provide an update on BP’s major projects progressing over the next few years.
Bob Dudley said: “Last year, we acted decisively to reset BP for a sustained period of lower oil prices and the results are coming through well. We are now in action to rebalance our financial framework in this new price environment.
“And I am confident that BP’s strong and well-balanced portfolio of businesses and projects gives us the ability to grow value into the future. All of this underpins our strong priority of sustaining our dividend and then growing free cash flow and shareholder distributions over the long term.”
Among the main points covered in today’s investor update are:
Brian Gilvary said: “Our principal objective is to re-establish the balance in BP’s financial framework, with operating cash flow covering capital expenditure and the dividend. We are already making strong progress and the plans we have set out will allow us to achieve this without compromising BP’s core growth options.”
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. Organic capital expenditure over the nine month period was $13.2 billion. At the end of the quarter, net debt was $25.6 billion representing a gearing level of 20.0%, including approximately 1% arising from the agreements in principle to settle with the United States government and Gulf states.
BP today announced a quarterly dividend of 10 cents per ordinary share, expected to be paid in December.
For the Upstream segment, pre-tax underlying replacement cost profit (1) was $0.8 billion, compared with $0.5 billion in the second quarter and $3.9 billion in the third quarter of 2014. The lower result compared with a year ago was primarily due to the effect of lower oil and gas prices, partly offset by lower costs and strong gas trading results.
The Downstream segment continued to perform strongly, reporting a pre-tax underlying replacement cost profit1 of $2.3 billion – up from $1.9 billion in the previous quarter and $1.5 billion in 3Q 2014. Compared with a year earlier, the result benefitted from improved refining margins, strong refining operations and fuels marketing and, again, cost benefits from simplification and efficiency programmes.
BP reported estimated underlying net income from Rosneft (3) for the quarter of $382 million compared with $110 million in 3Q 2014. As previously announced BP received an annual dividend from Rosneft of $271 million during the quarter.
During the quarter BP was awarded five new blocks in the UK North Sea. In October it was announced that, subject to government approval, BP was also awarded three shallow water blocks in the Mediterranean Sea off Egypt. The Woodside-operated Western Flank A project offshore Western Australia, the latest phase of the North West Shelf development, began production in October.
As previously announced, in July agreements in principle were reached to settle all outstanding federal and state claims arising from the Deepwater Horizon oil spill. These provide for principal payments of up to $18.7 billion over a period of 18 years (4). On October 5 the United States filed the proposed consent decree with the court, beginning a 60-day public comment period. The court has scheduled a hearing in March 2016 to consider approval of the final consent decree. BP also entered into a definitive Settlement Agreement with the five Gulf states and has accepted releases received from the vast majority of local government entities and payments required under those releases were made during the third quarter (5).
A charge of $426 million for the incident was taken in the quarter, bringing the total cumulative pre-tax charge to $55.0 billion. The additional charge comprises $460 million for business economic loss claims not provided for, ongoing costs and adjustments to other provisions.
In conclusion, Bob Dudley said: “BP has successfully adapted to changing circumstances many times in its history and, in a hard time for the entire industry, I believe we will once again successfully take on today’s challenges. We are already in action, with a quality portfolio and clear plans for the future, underpinned by enduring principles. I am confident BP will continue to deliver value into the years and decades ahead.”
BP press office, London: firstname.lastname@example.org, +44 (0)20 7496 4076
Full BP p.l.c. Group results for the third quarter of 2015 can be seen at www.bp.com/results.
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