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* BP reports $86 mln profit in Q3
* Results weighed by weak refining profits, trading
* Asian demand recovery a bright spot
(Adds details, updates shares)
By Ron Bousso and Shadia Nasralla
LONDON, Oct 27 (Reuters) - BP swung back to a small
profit in the third quarter but warned the pace of recovery from
the pandemic remains uncertain and continued to weigh on fuel
demand and refining profits.
The London-based company said that while fuel demand in
Asia, particularly in China, was recovering, global consumption
remained weak so far in the fourth quarter.
BP's shares are down more than 50% this year and remain near
25-year lows, battered by weak oil prices and investor concerns
about BP's ability to successfully shift to renewable energy
from fossil fuels.
The coronavirus crisis will however not slow BP's transition
plans, Chief Financial Officer Murray Auchincloss told Reuters.
"It is hard to imagine the environment being much more
brutal than it was in the third quarter," Auchincloss said, even
if the fourth quarter "is not materially different."
BP reported a $86 million underlying replacement cost
profit, the company's definition of net income, for the three
months to Sept. 30, beating analysts' expectations of a loss of
$120 million. It followed a record $6.7 billion loss in the
previous quarter, when it also halved its dividend.
Weak fuel demand continued to weigh on refining profit
margins, with BP refineries operating at 80% of capacity,
Auchincloss added. Fuel demand remains around 15% below
pre-crisis levels.
BP's refining margin of $6.20 per barrel was up slightly
from the previous quarter but less than half of what it was a
year earlier.
The results were boosted by higher oil prices and stronger
natural gas trading results, though oil trading was
"significantly lower" than the previous quarter, BP said.
Refining and trading typically help offset weak oil and gas
prices. But BP and its peers hit a perfect storm this year when
the coronavirus epidemic led to both sharp drops in oil and gas
prices and fuel demand.
"Despite the difficult macro backdrop, this was a strong
underlying performance from BP," Credit Suisse analyst Thomas
Adolff said in a note.
BP expects to be resume buybacks in the fourth quarter of
next year at the earliest, CFO Auchincloss said.
BP shares were up 1.65% by 1018 GMT.
RESTRUCTURING
BP plans to increase its renewable power capacity 20-fold by
2030 while reducing its oil output by 40% and diverting more
funds to low-carbon investments.
The London-based company also plans to lay off around 10,000
employees, or roughly 15% of its global workforce at a cost of
around $1.4 billion spread over the next few
quarters.
But investors have welcomed the new strategy cautiously amid
concerns that BP's won't be able to hit its targeted profit
margins in the transition.
BP slightly reduced its debt in the quarter and said it
expected a further decline in the fourth quarter as a result of
asset sales.
Its debt-to-equity ratio, or gearing, including leases, was
37.7% at the end of September, flat on the quarter and up from
35.9% a year ago.
Rivals including Royal Dutch Shell and Exxon Mobil have also
seen their market values fall in recent months. They will report
later this week.
"It is difficult to predict when current supply and demand
imbalances will be resolved and what the ultimate impact of
COVID-19 will be," BP said.
(Reporting by Ron Bousso and Shadia Nasralla; editing by Jason
Neely and David Evans)
