Shares in BP slumped by nearly 5% yesterday after the oil and gas major reported its worst quarterly profits in almost four years.

The 30% decline during the three months from July to the end of September was expected as demand for oil has slowed amid lower global economic activity, particularly in China. Underlying replacement cost profit, BP's preferred measure, of $2.3 billion (£1.77bn) was in fact slightly better than the $2.1bn anticipated by analysts.

Yet the results were still BP's weakest since the fourth quarter of 2020 when the industry was hit by the Covid pandemic. The group reported a net profit of $2.8bn in the second quarter of this year, and $3.3bn in the third quarter of last year.

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“Against a backdrop of difficult trading conditions, this last quarter has not been plain sailing for BP and profit is considerably lower than it was this time last year," said John Moore, senior investment manager at RBC Brewin Dolphin.

"Oil price conditions, combined with the costs associated with simplification of the business, has put BP on the back foot. And while that may remain unchanged, there is self-help potential that could help to steady the ship."

Mr Moore said there has been uncertainty around the company’s strategic financial priorities, but the news on share buybacks and dividend payments should quell that to some extent. BP confirmed that it will continue its current buyback programme at the rate of $1.75bn during the next three months, while the dividend was maintained at eight cents per share.

BP's shares have underperformed those of its rivals so far this year as investors question the company's ability to generate profits. This is linked with concerns over the group's energy transition strategy.

Under former chief executive Bernard Looney, BP was pushing for a rapid expansion into renewables while also cutting oil output. Murray Auchincloss, who took over the top post in January, has reversed that with promises to focus on BP's high-margin businesses.

Earlier this month it was reported that BP had abandoned a flagship target to cut oil and gas output by 2030. The company has also scaled back its low-carbon hydrogen investments and plans to sell its onshore wind operations in the US.

“We have made significant progress since we laid out our six priorities earlier this year to make bp simpler, more focused and higher value,” Mr Auchincloss said in a statement.

“In oil and gas, we see the potential to grow through the decade with a focus on value over volume. We also have a deep belief in the opportunity afforded by the energy transition – we have established a number of leading positions and will continue high-grading our investments to ensure they compete with the rest of our business.”

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Danni Hewson, head of financial analysis at AJ Bell, said BP’s marginally better-than-expected results will have done little to alleviate the pressure on Mr Auchincloss.

"Of all the major oil companies BP perhaps went heaviest on the energy transition under Auchincloss’ predecessor Bernard Looney," Hewson said. "And while today’s announcement doesn’t explicitly confirm reports the company is abandoning targets to scale back its oil and gas production by 2030, the direction of travel seems pretty clear."

She said the company has fallen behind its US peers who have taken a more pragmatic approach to the energy transition with no plans to move out of hydrocarbons, no interest in renewables, and a focus instead on what they see as complimentary areas like carbon capture and hydrogen.

"BP has also been left behind by its close UK counterpart Shell, which has built a long-term strategy around natural gas - which is seen in some quarters as a bridge between more polluting fossil fuels like coal and oil and renewable energy," Ms Hewson added.

Shares in BP closed yesterday's trading in London 19.85p lower at 379.25p.