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BP has issued its third profit warning this year, announcing that weak margins at its refineries, lower sales of petrol and other oil products and higher exploration write-offs would affect earnings for the three months to September.
The London-listed oil major said in a trading statement that its refining margins had fallen to an average of $16.5 a barrel in the third quarter, compared with $20.6 a barrel in the previous three months, causing a $400mn to $600mn hit to earnings.
It also said that weaker fuel sales would lead to a hit of up to $300mn, while warning of up to $300mn from higher write-offs in oil and gas exploration. Net debt would also be higher than expected, it said, partly because some of the proceeds from divestments will fall into the fourth quarter.
It has been a difficult year for the oil group’s chief executive Murray Auchincloss, who is trying to win back investor confidence after being confirmed in the top job in January.
Auchincloss has refocused on BP’s core oil and gas business, most recently sanctioning the development of a new field, Kaskida, in the Gulf of Mexico, and putting the company’s US onshore wind farms up for sale.
Since then, BP has issued a profits warning ahead of every quarterly results announcement. Its share price is lagging behind its peers and down more than 12 per cent in the year to date. BP’s share price was flat on Friday after its trading statement.
Last quarter, BP warned about “significantly lower” refining margins, and Jefferies cut its consensus for earnings by about 20 per cent. It also took a hit of up to $1.5bn from a plan to scale back operations at its Gelsenkirchen refinery in Germany by about a third from 2025.
Giacomo Romeo, an analyst at Jefferies, said he expected consensus earnings would now be about 10 per cent lower than the $2.3bn previously forecast.
Analysts are concerned that BP is unlikely to be able to maintain its shareholder returns if oil prices, which are being driven up by the conflict in the Middle East, start to fall next year as producers increase supply.
Kim Fustier at HSBC warned that a benchmark Brent crude average of $76.5 a barrel would not support BP’s $7bn of annual share buybacks from 2025 onwards.