BP 3Q Profits Double, Tortue FID Still Due in 4Q
BP 3Q profits very nearly doubled year on year to $3.349bn, from $1.769bn in 3Q2017, the oil major said, underpinned by higher oil prices.
The $10.8bn US onshore shale acquisition from BHP announced early July is expected to complete October 31. BP said it will be entirely funded from cash, leaving proceeds from the associated $5bn-$6bn divestments to pay down debt.
BP said its 3Q underlying replacement cost profit was $3.8bn, more than double a year earlier and the highest quarterly result in more than five years, buoyed by “significant earnings growth from the Upstream and Rosneft”. Nine-month production was 3.645mn barrels of oil equivalent per day (boe/d), up 2.5% year on year, while BP production excluding Rosneft equity was 2.51mn boe/d, up 3.4%.
Production excluding Rosneft in 3Q was 2.46mn boe/d, flat with 3Q2017. CFO Brian Gilvary said that UK Clair Ridge and the Egyptian gas West Nile Delta phase 2 are expected to start on schedule in 4Q2018.
Gilvary was asked about CEO Bob Dudley’s remarks at the Oil & Money conference October 10 when he said: “We plan for a $60-$65/b future, not $80/b.” Responding October 30, Gilvary said the base case for planning future expenditure is $50/b although BP has a range of benchmarks for project evaluation.
Low gas storage levels in the US had seen Henry Hub gas prices rise above $3/mn Btu for the first time in six months, while Brent crude averaged some $75/b during 3Q2018, he remarked. That helped the average 3Q2018 price realised by BP reach $46.14/boe (3Q2017: $33.23), of which $69.68/b for liquids ($47.45) and $3.86/mn Btu for gas ($2.89).
BP expects to have achieved over $3bn of divestments in full year 2018, mostly back-end loaded, added Gilvary: BP'ss future $5bn-$6bn divestment programme would be spread over 2019 and 2020; this compares with $4.5bn divested last year.
Capital expenditure in 2018 to end up at $15bn, with 2019 capex in the range of $15bn-$17bn – that $2bn range providing “a huge amount of flexibility,” the CFO added. Capex in 3Q2018 was $3.7bn.
Payments in respect of the 2010 Macondo oil spill during full year 2018 are expected to be around $3bn, the CFO added. Asked about ongoing liabilities, Gilvary said the vast majority of claims have been processed, with some claims that got denied being allowed to resubmit. But he said 3Q2018 was one of the quietest quarters for payments at $50mn.
Tortue FID on schedule, five FIDs taken so far this year
On the Tortue floating LNG project off Senegal/Mauritania, Gilvary said there was no change to the target of taking Final Investment Decision (FID) in 4Q2018 for first gas in 2022 from a 2.5mn mt/yr project; subsequent Tortue phases up to a total of 10mn mt/yr would be decided later.
He pointed to five FIDs worldwide so far in 2018 by BP: Oman, India, Angola and two in the North Sea. And he cited Brazil as one area where BP might look to “step out” or expand, but staying within its $15bn-$17bn global capex frame. Thunder Horse Northwest expansion (oil) in the US Gulf and Australia’s Western Flank B (gas) project started production in October were both ahead of schedule and were BP’s 4th and 5th upstream major projects to start up in 2018.