BP's third-quarter profit soared and cash flow jumped, enabling the British energy major to cut net debt faster than expected.
The company reported an underlying replacement-cost profit--a similar metric to the net income that U.S. oil companies report--of $8.46 billion for the third quarter of the year. This compares with the $2.21 billion it reported in the same period last year and the $7.33 billion analysts expected, according to a company-compiled consensus.
BP's new Chief Executive Meg O'Neill is seeking to revive the company's fortunes with a stricter approach to capital expenditure while shoring up its balance sheet.
Under her leadership, BP is accelerating efforts to cut net debt, aided by elevated oil and gas prices, as well as exceptional refining margins that have provided a cash windfall.
Over the quarter, BP put $8.4 billion toward reducing its net debt, leaving it at $13.9 billion from $22.3 billion at the end of the second quarter. This figure doesn't include the roughly $6 billion in proceeds it expects from the sale of lubricants business Castrol to Stonepeak, and means BP has met its 2027 net debt targets one year early.
O'Neill will get her first opportunity to stamp her mark on the company at December's strategy update. Until now, she has focused on improving its operational performance while promising to invest wisely after an expensive pivot into renewable energy failed to deliver the promised returns.
While its peers have returned cash to shareholders in the form of hiked buybacks, BP has not. Analysts were not expecting a return of its quarterly buyback, and have instead said BP should focus on strengthening its balance sheet and deploy capital toward projects that will deliver cash flow over the longer term.
O'Neill's strategy isn't expected to deviate wildly from the one she inherited when she took over in April. Its traditional oil-and-gas business will be the company's focus with spending on its renewable energy assets likely tightened.
The company booked around $4 billion linked to its transition businesses--a sign that divestments might be on the way soon.
Sales of assets or whole units wouldn't be surprising. O'Neill has already put U.K. North Sea assets and U.S. biogas business up for sale. Th decisions, she said, will be based on value, not sentiment or history.
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