BP Posts Huge Natural Gas Trading Profit, to Increase US Oil and Gas Production

British oil major BP PLC reported better than expected third quarter earnings Tuesday. $BP net income was $8.2bn, up from $3.3bn a year earlier and higher than $6.1 billion average forecasts and $3.3 billion in the year-ago period. BP described “exceptional” profits from its gas trading and low-carbon energy division bringing in $6.2bn, up from $3bn in the second quarter. BP shares have risen more than 45 per cent this year. BP will buy back a further $2.5bn in shares in the fourth quarter, which would bring total share purchases for the year to just over $10bn. It left its dividend unchanged after raising it by 10 per cent in July.

The report follows other energy giants reporting massive profits this quarter, ExxonMobil’s third quarter profit was $19.66 billion up from $17.9 billion, its highest ever. Fellow American Oil giant Chevron posted Q3 net income of $11.23Billion just short of a record high. Shell, Europe’s largest oil company reported stronger than expected third quarter results of $9.45 billion. Houston based oil refiner Phillips 66 $PSX reported Q3 earnings of $5.4 billion.

Bp Rig

BP PLC ADR (NYSE: $BP) Reported Earnings Before Open Tuesday

Earnings

BP plc reported third-quarter 2022 underlying replacement-cost profit, a metric similar to the net income that U.S. oil companies report, came in at $8.2 billion. That beat the $6.1 billion average projection of 29 analysts compiled by BP and the $3.3 billion it reported a year earlier boosted by high refining margins and higher oil-and-gas trading results.

Highlights

BP Q3 22 Earnings:

  • Adj EPS $0.43 (est $0.32)
  • Revenue $57.81 (est $59.71B)
  • Adj Net $8.15B (est $6.18B)
  • Oper Cash Flow $8.29B (est $10.27B)
  • Announces Further $2.5B Share Buyback
  • Sees 4Q Reported Upstream Prod `Slightly’ Lower Vs 3Q

Natural Gas Profits Soared

The third quarter featured underlying profit from BP’s gas and low-carbon business segment totaling $6.2 billion in the third quarter before interest and taxes, double the amount posted in the second quarter and more than BP’s profit from the segment in the first nine months of 2021.

BP Chief Financial Officer Murray Auchincloss resisted calls by analysts on a call Tuesday morning to be more specific about gas-trading profit. Mr. Auchincloss declined to confirm one analyst’s estimate of $3 billion, saying “I think transparency on trading is a tricky thing.”

Europe’s energy crisis and Russian threats with NS1 has enforced necessity to fill natural-gas storage supplies ahead of winter. Energy majors like Shell and BP have cut back on their own gas usage. Shell Chief Executive Ben van Beurden said last week that Shell has reduced by 40% or more its natural-gas input to refineries and chemical plants in the Netherlands and Germany.

Windfall Profit Taxes

BP said it expects to pay around $800 million as a result of a new U.K. windfall-profits levy this year, covering seven months that the measure will be in place. That will be part of a projected $2.5 billion in overall 2022 taxes linked to its U.K. North Sea business, the company said.

CapEx

BP said it expects total capital expenditure in 2022 to be about $15.5 billion. That figure assumes the completion by year-end of its purchase of U.S. biogas producer Archaea Energy for $4.1 billion including debt, which was announced in October.

BP previously forecast capital spending this year at $14 billion to $15 billion.

Dividends and Buybacks

BP will buy back a further $2.5bn in shares in the fourth quarter, which would bring total share purchases for the year to just over $10bn. It left its dividend unchanged after raising it by 10 per cent in July and said it is on track for planned annual dividend increases of about 4% through 2025.

Dividends are sought after in energy majors as we saw with both US Oil giants Chevron and ExxonMobil in their reports.

Russian Loss

BP has emerged strongly after reporting a loss for the first quarter of the year tied to the company’s decision to exit its Russia holdings. BP took a half-year $25.5 billion (£19.9bn) hit from its move to exit its near-20% stake in Russian government-controlled oil producer Rosneft in response to the Ukraine war. This hit was the biggest by companies pulling back from Russia, dragged BP to a $20.4 billion headline loss for the first quarter.

BP said at the time that the loss didn’t change its strategy or curtail its plans to distribute cash to investors while reducing debt.

Outlook

BP expects overall full-year production to be “slightly higher” in 2022, despite the loss of output from Russia after its decision to exit from the country. BP said it expects high oil-and-gas prices to continue, fueled in part by prolonged energy shortages in Europe.

BP said it plans to boost its oil-and-gas production both on- and offshore in the U.S. and the North Sea, with as many as seven new drilling rigs planned across those regions.

BP may make other, smaller green energy acquisitions this year to help “accelerate” the company’s transition, Chief financial officer Murray Auchincloss, but total expenditure would not exceed the $14bn-$16bn BP has projected.

Source: BP

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