BP

BP PLC said Tuesday that it expects to report an increase in upstream production this year as it reported an on-quarter fall in third quarter underlying replacement cost profit. Here's what the oil major had to say:

On earnings performance:

"Compared to the second quarter, the result was impacted by weaker refining margins, an average oil trading result and lower liquids realizations, partly offset by an exceptional gas marketing and trading result and higher gas realizations."

On adjusting items:

"This charge includes adverse fair value accounting effects of $10.1 billion, primarily due to further increases in forward gas prices compared to the end of the second quarter, partly offset by $2.0 billion gain on sale relating to the formation of Azule Energy."

On outlook:

"BP now expects reported upstream production to be slightly higher compared with 2021 despite the absence of production from our Russia incorporated joint ventures. On an underlying basis, we expect upstream production to be higher."

"BP continues to expect the other businesses & corporate underlying annual charge to be in a range of $1.2 billion-1.4 billion for 2022. The charge may vary from quarter to quarter."

"BP continues to expect the depreciation, depletion and amortization to be at a similar level to 2021."

"The underlying effective tax rate [ETR] for 2022 is expected to be around 35% but is sensitive to the impact that volatility in the current price environment may have on the geographical mix of the group's profits and losses."

"BP now expects divestment and other proceeds to be slightly over $3 billion in 2022. Against a target of $25 billion of divestment and other proceeds between the second half of 2020 and 2025 BP has now received $15.3 billion of proceeds."

"BP continues to expect Gulf of Mexico oil spill payments for the year to be around $1.4 billion pre-tax including the $1.2 billion pre-tax paid during the second quarter."

"On average, based on BP's current forecasts, at around $60 per barrel Brent and subject to the board's discretion each quarter, BP continues to expect to be able to deliver share buybacks of around $4.0 billion per annum and have capacity for an annual increase in the dividend per ordinary share of around 4% through 2025."

"Looking forward, the outlook for working capital remains subject to a number of factors, including price. However, following the build in working capital as a result of rising gas prices since 2021, we now expect the working capital movement to include a release of around $7 billion, weighted toward the second-half of 2023 and 2024, primarily as LNG cargoes are delivered."

On capital expenditure:

"Capital expenditure in the quarter was $3.2 billion. BP now expects capital expenditure of around $15.5 billion in 2022, if the acquisition of Archaea Energy completes before year end."

On refining:

"In refining, we expect margins to remain high, the benefits of which will be partially offset by elevated energy prices, a higher level of turnaround activity, and operational impacts following the shutdown of the BP-Husky Toledo refinery in Ohio, U.S."

On buybacks:

"During the third quarter BP generated surplus cash flow of $3.5 billion and intends to execute a $2.5 billion share buyback prior to announcing its fourth-quarter results, bringing total announced share buybacks from 2022 surplus cash flow to $8.5 billion, equivalent to 60% of 2022 surplus cash flow year to date."

"For 2022 and subject to maintaining a strong investment grade credit rating, BP remains committed to using 60% of surplus cash flow for share buybacks and intends to allocate the remaining 40% to further strengthen the balance sheet."

On macro outlook:

"BP expects oil prices to remain elevated in the fourth quarter due to the recent OPEC+ supply cut reducing supply amid ongoing uncertainty associated with Russian oil exports."

"BP expects global gas prices to remain elevated and volatile during the fourth quarter due to a lack of supply to Europe with the outlook heavily dependent on Russian pipeline flows or other supply disruptions."

"BP expects industry refining margins to remain elevated in the fourth quarter due to sanctioning of Russian crude and product and energy prices are also expected to remain high."

Write to Ian Walker at ian.walker@wsj.com

(END) Dow Jones Newswires

November 01, 2022 04:21 ET (08:21 GMT)

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