BP reports drop in profit and takes hit from US wind farms

Energy giant BP’s profit missed expectations in the three months to the end of September and the company flagged a more than half-billion dollar charge it had taken on three wind farms off the coast of New York.

BP said that underlying replacement cost profit – its preferred measure – was 3.3 billion dollars (£2.7 billion) in the third quarter, down from 8.2 billion dollars (£6.8 billion) a year earlier.

It had been expected to make around four billion dollars (£3.3 billion).

It is the company’s lowest third-quarter profit since 2020 when it made just 86 million dollars (£71 million at today’s exchange rate) as demand for oil, and the price of oil, plummeted during pandemic lockdowns.

In the decade from 2012 to 2022 the business has made an average of 3.1 billion dollars in underlying replacement cost profit in the third quarter.

Shares fell by around 5% on Tuesday morning following the announcement.

The business said production in its gas and low carbon energy division had been around 1.8% lower in the first nine months of the year than last year. Oil production, however, was 6.1% higher.

BP said it expects recent production restrictions from the Opec+ group of oil-producing nations to support prices, as will a “continued demand rebound”.

In June, the business and Norway’s Equinor filed a request with the authorities in New York to renegotiate the agreements they had on three wind farms amid soaring inflation and delays.

But this was refused earlier this month, prompting BP to take a 540 million dollar (£444 million) pre-tax impairment charge.

It had been a turbulent quarter at the top for BP. Boss Bernard Looney stepped down from the top job after it was revealed that he had not fully disclosed prior relationships with BP staff members to the board.

Murray Auchincloss, the finance boss who is now serving as interim chief executive, said: “This has been a solid quarter supported by strong underlying operational performance demonstrating our continued focus on delivery.”

He added: “As we laid out at our investor update in Denver, we remain committed to executing our strategy, expect to grow earnings through this decade, and on track to deliver strong returns for our shareholders.”

Shareholders saw some of that return on Tuesday as BP announced a 7.27 US cent dividend, compared with six cents the year before. It also said it would buy back 1.5 billion dollars (£1.2 billion) in shares from investors.

But the payout sparked criticism from groups who said that the oil major, which dialled back its climate pledges in February, is putting profit ahead of planet.

Joseph Evans, a researcher at the IPPR think tank, said: “It’s clear that oil and gas companies are prioritising their shareholders at the expense of the transition to clean energy, so the UK government must now take the reins by investing in renewables.”