BP PLC has again cut its planned organic capital expenditure for 2016, resetting it at $16 billion from its original guidance of $17-19 billion reported at the start of the year. The firm expects capital expenditure in 2017 to be $15-17 billion.
The firm reported a profit for the third quarter of $933 million on an underlying replacement cost basis, which is adjusted for nonoperating items and fair value accounting effects. This compares with a $720 million profit for the previous quarter and $1.8 billion in profits for third-quarter 2015.
BP says its third-quarter results were affected by a weaker price and margin environment, as well as “a number of mainly one-off and noncash items in the upstream.” However, the result also included benefits from lower cash costs being incurred throughout the group and a positive one-time tax credit.
Underlying pretax replacement cost profit for its downstream business was $1.4 billion, compared with $1.5 billion for the previous quarter and $2.3 billion for third-quarter 2015. Compared with a year earlier, the impact of the lower refining margin environment was partially offset by an increased retail performance and cost reductions across the segment.
The upstream segment recorded an underlying pretax replacement cost loss of $224 million, compared with profits of $29 million for the second quarter and $823 million for third-quarter 2015. Compared with a year earlier, the result reflected weaker oil and non-US gas prices and lower gas marketing and trading results, together with the impact of higher exploration write-offs and rig cancellation charges. The impacts of these were partially offset by benefits of cost reduction programs.
Brian Gilvary, BP chief financial officer, said the firm remains on track to rebalance organic cash flows next year at a Brent crude oil price of $50-55/bbl, which is “underpinned by continued strong operating reliability and momentum in resetting costs and capital spending.”
Cash divestment proceeds for the year to date, including the partial sale of its shareholding in Castrol India, are now $2.7 billion.
The firm recorded an overall headline profit for the quarter of $1.6 billion, which includes a net gain of $728 million for non-operating items and fair value accounting effects. This is comparable to a profit of $46 million a year earlier and a loss of $1.4 billion in the second quarter of this year, when significant charges associated with the Gulf of Mexico oil spill were taken.