BP chief executive Bernard Looney has hammered home his belief that the oil and gas giant is supporting the energy transition as it increased the valuation of its North Sea portfolio.
The company posted a better than expected $3.3 billion (£2.4bn) third quarter profit yesterday after benefiting from the increase in commodity prices that has been fuelled by the easing of lockdown measures around the world.
The results were released after calls by campaigners for curbs to be placed on oil and gas production reached a crescendo in the run-up to the COP26 climate summit, which is being held in Glasgow.
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However, Mr Looney said BP’s performance during the latest quarter had underlined the value of the kind of integrated energy business that the company is developing. BP expects to be able to use the profits it can generate from oil and gas production to invest in the clean energy systems the world needs, while funding generous payouts to investors.
The company said it planned to return an additional $1.25 billion to shareholders through share buybacks.
On a call with analysts, Mr Looney said BP is a cash machine at the kind of prices that oil and gas are fetching. The company expects market conditions to remain favourable.
Mr Looney said the company believes deeply in the premise that being integrated is the way to support the energy transition and to create value from it.
By way of example, Mr Looney noted that BP is making a range of significant investments in the UK. These include supporting the development of carbon capture and storage facilities in northern England, as part of the East Coast cluster. This was one of two clusters awarded fast track status by the Government last month, in preference to a rival Scottish scheme.
Mr Looney also highlighted plans to build a hydrogen fuel production plant, under a partnership with Aberdeen City Council, and BP’s nvestment in what is the largest electric vehicle charging network in the UK.
BP bid for windfarm acreage in the landmark ScotWind leasing round, which closed in July after attracting interest from a range of international energy giants.
Mr Looney said BP will produce less oil and gas under plans to high grade its portfolio. However, the value of its production could increase as a result of its focus on high margin barrels.
“You will continue to see this company invest in hydrocarbon projects,” he told analysts.
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BP retrenched in the North Sea amid the challenges posed by the sharp oil price fall from 2014 to 2016 and the downturn triggered by the pandemic.
The company has focused investment on plum assets including big fields it developed West of Shetland with Shell, such as Clair Ridge.
BP said yesterday that in the first nine months of this year it had reversed $1.6bn impairments previously recorded in respect of oil operations. The reversals mainly arose as a result of changes to the group’s oil and gas price assumptions. They include unspecified amounts in respect of the North Sea business.
BP cut the valuation of the North Sea operation by around $440m in the first quarter last year amid the fallout from the coronavirus crisis.
In February this year Mr Looney said the North Sea was one of eight key oil and gas basins on which BP would focus. It employs around 1,000 people in the North Sea business currently.
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Analysts had expected BP to make around $3.1bn third quarter profit on the replacement cost measure they follow. The company made $2.8bn in the preceding three months. It made $0.1bn profit in the third quarter last year.
BP declared a third quarter dividend of 5.46 cents per share, in line with the preceding quarter. It recently completed $1.4bn buy backs under a programme launched in August. BP shares closed down 12.05p at 344.95p.
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