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(Alliance News) - BP PLC on Tuesday reported a sharp year-on-year drop in third-quarter earnings but an improvement on the previous second quarter in the absence of exploration write-offs and recovering demand.
The London-based oil major said the gradual recovery in oil demand is set to continue, however, the shape and pace of recovery from the Covid-19 pandemic remains uncertain as it depends on the further spread of the virus.
Underlying replacement cost profit, the company's preferred measure, was USD86 million for the three months to September 30, compared with a loss of USD6.68 billion in the second quarter, and USD2.25 billion profit for the third quarter of 2019.
The reported loss for the quarter was USD450 million, narrowed sharply from a USD16.85 billion loss in the second quarter of 2020, reflecting absence of significant exploration write-offs and impairment charges, and a USD749 million loss for the third quarter of 2019.
BP said that the absence of significant exploration write-offs and recovering demand was partly offset by a significantly lower oil trading result.
By divisions, the company's Upstream business posted underlying replacement cost profit before interest and tax of USD878 million for the third quarter versus a USD8.49 billion loss in the second quarter and USD2.14 billion profit a year ago.
The Downstream unit posted profit of USD636 million, down from USD1.41 billion in the previous quarter and USD1.88 billion in the third quarter of 2020.
Rosneft, the company's Russian business associate, posted a USD177 million loss for the third quarter, widened from a USD61 million loss in the previous three months. In the third quarter of 2019, Rosneft had posted USD802 million profit.
Total revenue for the third quarter amounted to USD44.20 billion, up from USD31.19 billion in the previous quarters, but down from USD69.29 billion a year ago.
The company continues to make progress towards its target of USD2.5 billion in annual cash cost savings by end-2021 compared with 2019, with its new organisation on schedule to be in place by start of 2021. Proceeds from divestments and other disposals in the third quarter were USD600 million.
BP's headcount has reduced by a total of around 2,800 so far during 2020, including around 300 who have already left the organization as part of the so-called reinvent BP programme. A further 2,100 have elected to leave under the programme, which is expected to result in a total reduction of around 10,000 positions, the majority by the end of 2020.
The company expects to incur people-related costs associated with its restructuring program of around USD1.4 billion over the next one to two years, primarily in 2020.
Net debt at September 30, was USD40.4 billion, compared with USD46.5 billion a year ago. The company expects its debt to fall further in the fourth quarter as divestment proceeds are received.
"Having set out our new strategy in detail, our priority is execution and, despite a challenging environment, we are doing just that - performing while transforming. Major projects are coming online, our consumer-facing businesses are really delivering and we remain firmly focused on cost and capital discipline. Importantly, net debt continues to fall. We are firmly committed to our updated financial frame, including the dividend - the first call on our funds," said Chief Executive Officer Bernard Looney.
BP declared a third-quarter dividend of 5.25 US cents, halved from 10.25 cents in the third quarter last year.
Shares in FTSE 100-listed BP shares were up 2.7% early Tuesday in London at 205.45 pence each. Peer Royal Dutch Shell reports on Thursday. Its A shares were down 0.1% at 942.30p each.
By Tapan Panchal; tapanpanchal@alliancenews.com
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