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Digital delivering "incremental value" to bp

Replacement cost profit totalled $86m (£66m) from July to September

Dominic Ellis
|Oct 27|magazine8 min read

Digital continues to deliver "incremental value" to bp as it recorded a replacement cost profit (net income) of $86m (£66m) from July to September.

In Q3, it completed full alignment of its exploration and production financial systems onto one common template, providing lower back-office costs and leading to more improved operational and cost-efficiencies in the field. Robotic crawler technologies are also being rolled out to cut third party inspection and maintenance costs.

Speaking in a webinar today, Chief Executive Officer Bernard Looney added its 2020 capex will be $12bn (£9.07bn), down 25 percent on plans laid out at the start of the year, as it continues to drive "effiiency to our cost base" - which is further reflected in 2,800 job cuts and halving of senior executive positions to 120. It is committed to wholescale transformation, aiming to be net zero by 2050.

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Figures released to the market today:

  • Reported loss for the quarter was $0.5 billion (£0.38 billion), compared with losses of $16.8 billion for the previous quarter of 2020, reflecting absence of significant exploration write-offs and impairment charges, and $0.7 billion for the third quarter of 2019
  • Operating cash flow for the quarter, excluding Gulf of Mexico oil spill payments, was resilient at $5.3 billion, including $0.9 billion working capital release (after adjusting for net inventory holding gains). Gulf of Mexico oil spill payments in the quarter were $0.1 billion post-tax
  • Organic capital expenditure in the first three quarters of 2020 was $9.1 billion, in line with the full-year target of around $12 billion
  • BP continues to make progress towards its target of $2.5 billion in annual cash cost savings by end-2021 compared with 2019, with its new organization on schedule to be in place by start of 2021.
  • Proceeds from divestments and other disposals in the quarter were $0.6 billion. BP has already completed or agreed transactions for approaching half its target of $25 billion in proceeds by 2025, including the agreed $5 billion sale of BP’s petrochemicals business, expected to complete by year end.
  • Net debt at quarter-end was $40.4 billion, down $0.5 billion. This includes the impact of the $1.1 billion payment for the completion of the joint venture with Reliance. Net debt is expected to fall in the fourth quarter as proceeds from divestments are received.
  • A dividend of 5.25 cents per share was announced for the quarter.

Performing while transforming

  • BP has brought two new Upstream major projects into production since mid-year: Atlantis Phase 3 in the US Gulf of Mexico and, ahead of schedule, Khazzan Phase 2 (Ghazeer) in Oman.
  • Operations continued to be good with refining availability of 96.2 percent and Upstream plant reliability of 93 percent. Upstream unit production costs for the nine months of 2020 were 10% lower than 2019, reflecting progress on cost efficiency and strategic divestments.
  • While refining margins remained at historical lows, driven by the extremely weak environment, BP‘s marketing businesses recovered strongly in the quarter, with fuels marketing earnings growing 3% year on year and lubricants result broadly in line with a year earlier.
  • BP agreed to enter the offshore wind sector through a strategic partnership with Equinor to pursue offshore wind opportunities in the US, including taking a 50 percent stake in two leases off the US east coast.
  • The company announced plans for a network of ultra-fast chargers in Germany and BP Chargemaster won a contract to deliver over 1,000 charging points for Police Scotland.
  • It has announced a partnership with Microsoft under which the two companies will co-operate to progress their sustainability aims. BP has agreed to supply Microsoft with renewable energy and to extend its use of Microsoft’s cloud-based services.

bp Q3 results
Energy Digital magazine