The FINANCIAL — BP announced its financial results for the third quarter of 2013. Underlying replacement cost profit1 for the period was $3.7 billion, compared to $2.7 billion for the previous quarter. Operating cash flow in the quarter was $6.3 billion, accordign to BP.
Consistent with its commitment to maintaining a progressive and sustainable dividend policy, BP also announced that it will increase its quarterly dividend by 5.6%, to 9.5 cents per ordinary share, payable in December. Moving forward, BP’s board intends to review the level of dividend with the first and third quarter results each year.
“In 2011 we set a clear target for operating cash flow in 2014 and we are confident in its delivery. The strong operational progress we are now seeing across the group, combined with our focus on disciplined investment, also underpins our confidence in growing long-term sustainable free cash flow and being able to increase shareholder distributions. Today’s announcement is a further demonstration of this,” Bob Dudley, BP Group Chief Executive, said.
Dudley said that “in line with continued capital discipline, we expect BP’s capital spending in 2014 to remain around the level expected for this year, in the range of $24–to–$25 billion.” He added that the company also intends to continue its programme of focusing its business portfolio worldwide around BP’s key assets and strategic strengths and as a result expects to divest a further $10 billion in assets before the end of 2015.
Proceeds from these divestments – which will follow on from the $38 billion divestment programme completed over the past three years – are expected to be used predominantly for additional distributions to shareholders, with a bias to share buy-backs. Earlier in the year, BP announced an $8 billion share buy-back programme following receipt of the net cash proceeds of around $12 billion from the divestment of its share in TNK-BP and, as of 25th October, has spent $3.8 billion repurchasing shares for cancellation.
At the end of the third quarter, BP’s net debt ratio, or gearing, was 13.3%, at the low end of BP’s target range of 10-20% and reflects a strong balance sheet.
Underlying pre-tax replacement cost profit in BP’s Upstream segment was $4.4 billion for the third quarter, slightly higher than the previous quarter, according to BP.
Total reported production of oil and gas for the quarter, including Russia, was 3.17 million barrels of oil equivalent a day (boe/d).
Continuing growth in production from new major projects drove underlying oil and gas production2, excluding Russia, higher by 3.4% compared to the third quarter of 2012. Reported production, excluding Russia, of 2.21 million boe/d was 2.3% lower than a year earlier, primarily reflecting the impact of divestments.
BP’s Downstream segment reported underlying pre-tax replacement cost profit of $0.7 billion. The segment continued to deliver a strong operating performance, with refining availability maintained above 95% for the fifth consecutive quarter. However refining margins were significantly weaker than the second quarter this year due to high gasoline stocks, and Petrochemicals continued to see subdued market conditions.
BP reported underlying replacement cost profit for Rosneft of $808 million compared to $218 million in the second quarter, which was the first full quarter in which BP held its 19.75% stake in Rosneft. Higher Urals oil prices, a favourable duty lag effect and strengthening of the rouble against the dollar during the quarter benefited the result, partially reversing the negative impacts of these factors seen in the second quarter. During the quarter BP also received a dividend of $456 million for its interest in Rosneft. BP’s share of Rosneft oil and gas production in the quarter was 965 thousand boe/d.
In the quarter BP announced two significant exploration discoveries – in the East Nile Delta offshore Egypt and in the Cauvery basin offshore the south east coast of India. These followed an earlier significant discovery, announced in May, in the KG D6 block offshore India.
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