With the average price of gas at a hair over $2/gallon, I am equally surprised and dismayed that an oil giant like BP turned a profit in the third quarter. And that’s with profits down a staggering 96 percent compared to this time last year.
BP is the first of the big oil companies to report its earnings this week, with Shell, Total, Exxon and Chevron to come. The Financial Times has a very thorough breakdown of BP’s quarterly results, but I’ll pull the highlights. The first is that this beat analysts’ expectations:
BP returned to a profit in the third quarter as crude prices and energy demand recovered, but the oil producer warned that the outlook remained volatile as the pandemic threatens the global economy.
Underlying profit on a replacement cost basis — a measure of income tracked most closely by oil analysts — was $86m in the three months to September 30.
That beat analysts’ forecasts for a loss of $120m, but was down 96 per cent from $2.3bn in the same period last year, the company said on Tuesday.
The FT notes that the price of crude is up from its April low of under $20/barrel, it’s struggling to stay above $40 at the moment, which is lower than it was any month last year, per the US Energy Information Administration.
Part of why BP is doing well is that the deck is stacked in favor of being a gigantic company that profits off of the destruction of the Earth. Another part is that it’s cutting spending, per the FT:
To bolster its finances, BP said in August that it would cut the dividend for the first time since the Deepwater Horizon disaster in 2010. It maintained the payout at 5.25 cents. BP has slashed capital spending by billions of dollars, pledged to cut costs, including 10,000 jobs, secured new credit lines, issued bonds and deferred exploration activity.
“While the results were better than expected, they are still extremely weak and it is far too early to anticipate a change in market evaluation of BP’s likely future performance under its radical new strategy,” said Colin Smith, an analyst at Panmure Gordon.
If BP can make money now, in the midst of the pandemic, with gas as cheap as it is, I am at a loss.