- Performing while transforming
- Net debt reduced to $22.0 billion
- Further $2.5 billion share buyback announced
- High-grading hydrocarbons portfolio - formation of Azule Energy; final investment decision at Cypre; agreed divestment of Algeria
- Accelerating transformation to an IEC – agreed to acquire Archaea Energy - a leading US biogas producer; agreement with Hertz to advance North America fleet EV charging strategy
According to the company’s website press release on November 1, 2022:
‘’This quarter’s results reflect us continuing to perform while transforming. We remain focused on helping to solve the energy trilemma – secure, affordable and lower carbon energy. We are providing the oil and gas the world needs today – while at the same time - investing to accelerate the energy transition. Our agreement on Archaea Energy is the most recent step in our strategic transformation of bp.’’ - Bernard Looney, chief executive officer
Highlights
Underlying replacement cost profit* $8.2 billion
• Underlying replacement cost profit was $8.2 billion, compared with $8.5 billion for the previous quarter. 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.
• Reported loss for the quarter was $2.2 billion, compared with a profit of $9.3 billion for the second quarter 2022. The reported result for the third quarter includes inventory holding losses net of tax of $2.2 billion and a charge for adjusting items* net of tax of $8.1 billion. 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. Operating cash flow* $8.3 billion; net debt* reduced to $22.0 billion
• Operating cash flow in the quarter was $8.3 billion including a working capital build (after adjusting for inventory holding losses* and fair value accounting effects) of $6.2 billion, mainly due to the increase in the forward price of LNG.
• 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.
• 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.
• During the third quarter, bp completed share buybacks of $2.9 billion. The $3.5 billion share buyback programme announced with the second quarter results was completed on 27 October 2022.
• Net debt fell for the tenth successive quarter to reach $22.0 billion at the end of the third quarter. Further $2.5 billion share buyback within disciplined financial frame
• 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.
• In setting the buyback each quarter, the board will continue to take into account factors including the cumulative level of and outlook for surplus cash flow.
• Against the authority granted at bp's 2022 annual general meeting to repurchase up to 1.95 billion shares, bp had repurchased 677 million shares at 31 October. Progressing transformation to an Integrated Energy Company
• In resilient hydrocarbons bp is accelerating its biogas strategy - part of its bioenergy Transition Growth Engine - agreeing to acquire Archaea Energy a leading US biogas company. bp has also continued to make progress high-grading its portfolio: completing the creation of Azule Energy a 50:50 joint venture combining its Angolan assets with those of Eni; taking the final investment decision on the Cypre project offshore Trinidad; and announcing an agreement to sell its upstream business in Algeria to Eni.
• In convenience and mobility bp continued to advance its growth strategy in EV charging and convenience: announcing plans to collaborate with Hertz in North America to install a national network of EV charging solutions for Hertz and its customers powered by bp pulse; and expanding its partnership with leading retailer REWE in Germany, to install fast, reliable, convenient charging for customers while they shop.
• In low carbon energy bp continued to progress its renewables and hydrogen strategy. In Australia, bp closed its acquisition of a 40.5% stake in AREH, one of the world's largest planned renewables and green hydrogen* energy hubs. And in the UK, two bp-led projects - H2Teesside and Net Zero Teesside Power - have been shortlisted in Phase 2 of the UK government's cluster sequencing process for support of carbon capture, use and storage (CCUS).
Financial results
At 31 December 2021, the group's reportable segments were gas & low carbon energy, oil production & operations, customers & products and Rosneft. The group has ceased to report Rosneft as a separate segment in the group’s financial reporting for 2022. From the first quarter of 2022, the group's reportable segments are gas & low carbon energy, oil production & operations and customers & products. For more information see Note 1 Basis of preparation - Investment in Rosneft. For the period from 1 January 2022 to 27 February 2022, any net income from Rosneft is classified as an adjusting item.
In addition to the highlights on page 2:
• Loss attributable to bp shareholders in the third quarter was $2.2 billion compared with a loss of $2.5 billion in the same period of 2021. Loss attributable to bp shareholders in the nine months was $13.3 billion compared with a profit of $5.2 billion in the same period of 2021.
• Adjusting items* in the third quarter and nine months were an adverse pre-tax impact of $8.3 billion and $39.4 billion respectively, compared with an adverse pre-tax impact of $6.4 billion and $5.7 billion in the same periods of 2021.
• As a result of bp's two nominated directors stepping-down from the Rosneft board on 27 February, bp determined that it no longer meets the criteria set out under IFRS for having "significant influence" over Rosneft. bp therefore no longer equity accounts for its interest in Rosneft from that date, treating it prospectively as a financial asset measured at fair value. Within the nine-month result, the loss of significant influence and an impairment assessment led to a net pre-tax charge of $24.0 billion classified as an adjusting item, reducing equity by $14.4 billion. A further $1.5 billion pre-tax charge relating to bp's decision to exit its other businesses with Rosneft in Russia is also included in the nine-month result, reducing equity by $1.2 billion. See Note 1 for further information.
• Adjusting items for the third quarter and nine months 2022 also include adverse fair value accounting effects* of $10.1 billion and $16.7 billion respectively compared to an adverse pre-tax impact of $6.1 billion and $7.2 billion respectively in the same periods of 2021. Under IFRS, reported earnings include the mark-to-market value of the hedges used to risk-manage LNG contracts, but not of the LNG contracts themselves. The underlying result includes the mark-to-market value of the hedges and recognises changes in value of the LNG contracts being risk managed.
• Adjusting items for the third quarter and nine months 2022 also include a non-taxable gain of $2.0 billion arising from the contribution of bp's Angolan business to Azule Energy.
• There were pre-tax inventory holding losses of $2.9 billion and gains of $2.8 billion for the third quarter and nine months 2022 respectively. The loss arose in the third quarter due to falls in crude and product prices, compared to the significant increases in the first half of the year.
• The effective tax rate (ETR) on RC profit or loss* for the third quarter and nine months was 96% and -242% respectively, compared with -175% and 57% for the same periods in 2021. Excluding adjusting items, the underlying ETR* for the third quarter and nine months was 37% and 33% respectively, compared with 35% and 31% for the same periods a year ago. The higher underlying ETR for the third quarter and nine months reflects the UK Energy Profits Levy on North Sea profits and the absence of equity-accounted earnings from Rosneft, partly offset by changes in the geographical mix of profits. ETR on RC profit or loss and underlying ETR are non-GAAP measures.
• Operating cash flow* for the third quarter and nine months 2022 was $8.3 billion and $27.4 billion respectively, compared with $6.0 billion and $17.5 billion for the same periods last year.
• Capital expenditure* in the third quarter and nine months 2022 was $3.2 billion and $9.0 billion respectively, compared with $2.9 billion and $9.2 billion in the same periods of 2021.
• Total divestment and other proceeds for the third quarter and nine months were $0.6 billion and $2.5 billion respectively, compared with $0.3 billion and $5.4 billion for the same periods in 2021. Other proceeds for the nine months 2022 consist of $0.6 billion of proceeds from the disposal of a loan note related to the Alaska divestment. See page 31 for further information.
• At the end of the third quarter, net debt* was $22.0 billion, compared with $22.8 billion at the end of the second quarter 2022 and $32.0 billion at the end of the third quarter 2021.
