In recent weeks, BP (BP.) has announced several new green tie-ups, putting several million dollars into a range of technological developments. These may have generated headlines but its third quarter results show what is still dictating the group's fortunes in the short-term - a good oil price to support upstream earnings and consistent downstream income.
The supermajor managed the latter but an average oil price of $62 (£48) per barrel during the period hit the group's underlying replacement cost (RC) profit for the three months to 30 September, which fell by a fifth on the previous quarter and a hefty 39 per cent on a year ago. The upstream division’s RC pre-tax profit fell 37 per cent quarter-on-quarter to $2.1bn, with heavy weather in the Gulf of Mexico compounding the impact of lower prices on sales.
Coupled with a $2.6bn write-down based on asset sales announced in the quarter, this forced the group into a net loss of $700m and gearing climbed from 31 per cent to 31.7 per cent between 30 June and 30 September.
For investors, this means a flat dividend at 10.25¢ a share for the quarter and chief financial officer Brian Gilvary has also cut scrip option for payouts. Gearing would need to fall back below 30 per cent before dividends would be increased, said Mr Gilvary on an investor call, also flagging a longer pause. A day after the call, BP said in a statement no decisions had been made on the fourth-quarter dividend. Yet Panmure Gordon analyst Colin Smith said a dividend increase at the end of the year would be “extremely unlikely”.
BP earned itself an easy beat against analyst earnings expectations by warning earlier this month that its underlying tax rate would hit 50 per cent for the period, and then publishing a third quarter figure of 40 per cent, in line with full-year guidance.
