The U.S.-listed shares of British energy giant BP (BP) (GB:BP) declined more than 2% in pre-market trading, as the company reported a major slump in Q3 earnings due to lower crude prices and weak refining margins. The oil and gas company’s underlying replacement cost profit (similar to the net profit metric) plunged 31.2% year-over-year to $2.23 billion. Nonetheless, BP’s Q3 earnings surpassed analysts’ consensus of $2.1 billion.
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BP’s UK shares were down 2.3% as of writing and have declined 13% year-to-date.
BP Delivers Unimpressive Performance in Q3
BP’s Q3 results marked its weakest performance since the fourth quarter of 2020, when the oil and gas companies tumbled due to the COVID-19 pandemic. The Q3 underlying replacement cost profit not only declined significantly from the prior-year quarter but was also lower than the $2.76 billion profit reported in the second quarter.
The bottom line was impacted by lower oil prices due to worries over a subdued demand outlook. As per BP, oil prices fell 7.3% year-over-year in the third quarter.
Another concerning aspect of Q3 results was the increase in net debt to $24.2 billion from $22.3 billion in the comparable quarter of the prior year. The company attributed the rise in net debt to lower operating cash flow, higher capital expenditures, and lower divestment and other proceeds.
Finally, operating cash flow fell to $6.76 billion from $8.75 billion in the third quarter of 2023 and reflected inventory holding losses, fair value accounting effects, the impact of the price environment, and the timing of various payments.
BP Reaffirms Shareholder Returns
Despite a tough quarter, BP maintained its dividend at $0.08 per share after increasing it in the second quarter. Moreover, it reiterated its commitment to the $1.75 billion share buyback plan for the fourth quarter of 2024.
However, the company cautioned that it intends to review the aspects of its financial guidance, including the guidance for 2025 share buybacks worth at least $14 billion, when it updates the medium-term plans in February 2025.
Is BP Stock a Buy or Sell?
BP stock has a Moderate Buy consensus rating based on two Buys and three Holds. The average BP stock price target of $39.50 implies 27.2% upside potential. These ratings and price targets could change following today’s results.
