BP has reported a replacement profit for the third quarter of $5.14 billion, slightly beating the consensus of analysts’ expectations of $5.03 billion.
Including the impact of the Gulf of Mexico oil spill, net cash provided by operating activities for the third quarter and nine months was $6.9 billion and $17.1 billion respectively, compared with net cash used in operating activities of $0.7 billion for the third quarter of 2010 and net cash provided by operating activities of $13.8 billion for the nine months of 2010.
Analysts expected the company to report a 9% fall in year-on-year Q3 profit, attributable to a loss of revenue from the Gulf of Mexico and maintenance and safty upgrade stoppages elsewhere outweigh this year’s high oil prices.
The group income statement for the third quarter and nine months includes pre-tax charges related to the Gulf of Mexico oil spill of $0.6 billion and $0.4 billion respectively.
CEO Bob Dudley, in a statement accompanying the figures, dubbed Q3 a “turning point” for the company.
Dudley, who aims to create a “stronger, safer BP,” said that the company will focus its investment on the company’s distinctive strengths, where it has proven capabilities and long experience.
These include exploration, where the company intends to double its investment; operations in the deep water; the management of giant fields; and building gas value chains. It will also continue to develop its competitively strong downstream businesses.
BP will also continue to actively manage its portfolio to create both focus and value. It plans to extend its current divestment programme to $45 billion, divesting a further $15 billion in assets by the end of 2013 in addition to the current programme of $30 billion. Previously announced plans to sell two US refineries and associated marketing activities are included in the extended programme.
The company will re-invest in quality, higher-growth opportunities, mainly in exploration and production, while divesting low-returning assets.
Investors have been uneasy at BP’s inability to recover from Macondo and a sense that, before the disaster, the company had been pushed to take safety risks in order to keep up with rival supermajors ExxonMobil, Total, Shell, Chevron and ConocoPhillips, all of which are anticipated to post significantly higher quarterly profits over last year later this week.
There is little appetite for BP to follow in ConocoPhillips’s foot steps and spin off upstream from downstream. Instead, some shareholders have suggested BP should break itself up geographically, divesting itself of a troublesome stake in the TNK-BP enterprise in Russia and its American operations to concentrate on Caspian, Middle East and other international assets.
The company has already been divesting assets to meet the estimated $40 billion cost of the Deepwater Horizon spill, a program which it is now increasing from $30 billion to $45 billion.
The London Times today reports that the company may be re-thinking it’s ‘frontier’ strategy – previously articulated by Dudley – as part of an overall business review.
“With many of the world’s major oil and gas basins in decline, our industry will have no choice but to continue to look to new and increasingly challenging frontiers. These include the Arctic, unconventional energy sources like shale gas and the very deep water,” Dudley said in June.
