BP's 3Q Profit Beat Market Expectations -- Earnings Review

By Jaime Llinares Taboada

BP PLC reported results for the third quarter on Tuesday. Here's what you need to know:

UNDERLYING REPLACEMENT COST PROFIT: BP reported an underlying replacement cost profit of $86 million, beating a consensus estimate of a $120 million loss, compiled by the company and based on 25 analysts' forecasts. The result narrowed heavily from a year earlier, when the oil-and-gas company posted a $2.25 billion underlying RC profit.

OPERATING CASH FLOW: Cash flow from operations was $5.20 billion, beating a market consensus of $3.53 billion, taken from FactSet and based on nine analysts' estimates. It came in below the $6.06 billion reported a year prior, but improved from the $3.74 billion posted in the second quarter of 2020.

WHAT WE WATCHED:

--LOW-CARBON BUSINESS: BP didn't provide a meaningful update on its low carbon energy transition strategy. CEO Bernard Looney said that the company is "performing while transforming," and highlighted the completion of oil-and-gas projects in the U.S. and Oman.

--DEBT: Net debt was reduced by $0.4 billion to $40.4 billion as at Sept. 30, and BP expects this to fall further in the fourth quarter as proceeds from sales are received. The FTSE 100 group has set targets to bring net debt below $35 billion. BP also aims to secure $25 billion via divestments by 2025.

--NEAR-TERM OUTLOOK: The company offered some hope on hydrocarbon markets, saying the gradual recovery in oil demand is set to continue. In addition, OPEC+ production cuts are stabilizing the crude market, and declining U.S. gas supply should support prices in Europe and Asia. However, the refining margin outlook is challenging, as inventories remain high and the pandemic continues to hurt demand for gasoline and jet fuel.

Write to Jaime Llinares Taboada at [e-mail]; @JaimeLlinaresT

(END) Dow Jones Newswires

October 27, 2020 06:19 ET (10:19 GMT)

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