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1 Year : From Oct 2018 to Oct 2019
By Sarah Kent
LONDON -- BP PLC said Tuesday its profit more than doubled in the third quarter, as strong crude prices put Big Oil on track to deliver record levels of cash this year.
London-based BP said its replacement cost profit -- a number analogous to the net income that U.S. oil companies report -- was $3.1 billion in the third quarter, compared with $1.4 billion in the same period a year earlier. Its underlying profits rose to $3.8 billion, a five-year high and roughly a third higher than analysts expected.
BP shares were up about 4% in early trading in London.
Exxon Mobil Corp., Chevron Corp. and Royal Dutch Shell PLC are all due to report results later this week.
Years of cost-cutting caused by the slump in oil prices are beginning to pay dividends for the industry's giants as the market rebounds. But investors remain skeptical, making solid delivery on results crucial for companies like BP.
Last week, French oil giant Total SA and Norway's Equinor ASA -- formerly known as Statoil -- both announced a sharp increase in earnings for the third quarter, while continuing to emphasize their commitment to control spending and grow production.
BP echoed that sentiment. The company said it remains committed to capital discipline and growing distributions to shareholders. The British oil giant has already delivered on popular shareholder programs, increasing its dividend in July.
BP said it's generating so much cash at the moment that, provided oil prices remain around their current range, the company will pay for its near $11 billion acquisition of BHP Billiton Ltd's onshore U.S. oil and gas assets entirely in cash. When the deal was announced in July, BP had planned to fund 50% of the purchase through equity.
"We're very confident in the outlook for the company," Chief Financial Officer Brian Gilvary said. "The oil price is currently north of $75; we break even at $50...we have more than sufficient surplus cash."
BP said it expects to complete the BHP transaction Wednesday. Linked to the deal, BP is planning $5 billion-$6 billion-worth of divestments, with the proceeds intended to pay down the company's debt.
It's also closing in on its ambition to return to production levels last seen before the company's fatal blowout in the Gulf of Mexico eight years ago. To pay for the disaster, which killed 11 people and caused the worst offshore oil spill in U.S. history, BP sold off billions of dollars of assets, shrinking its production. In addition to its acquisition of BHP's assets, BP started production from two new major projects this month.
"The key focus is growing the company," Mr. Gilvary said. "We laid out a program for 2021 with growth targets. We're ahead of those targets."
BP said payments related to the 2010 disaster amounted to $500 million in the third quarter, and are expected to total just over $3 billion this year. BP's landmark $20 billion settlement with the U.S. government in 2015 requires the company to make annual payments of around $1 billion through the end of the next decade.
Write to Sarah Kent at firstname.lastname@example.org
(END) Dow Jones Newswires
October 30, 2018 05:46 ET (09:46 GMT)
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