BP Profits Soar to 18-Year High as Refinery Boom Drives Growth

BP profit hits 18-year high on refinery boom

BP’s third-quarter profit rose to its highest level in 18 years as stronger oil-refining margins and higher refinery utilization boosted earnings. The results also helped the British energy company reduce debt and make faster progress on liabilities tied to the Deepwater Horizon disaster.

BP reported adjusted net income of $8.46 billion for the quarter, up from $2.21 billion during the same period a year earlier. The result was also above the average analyst estimate of about $7.3 billion, according to the company’s compiled consensus.

The figure was BP’s highest quarterly adjusted profit since the third quarter of 2008. More than half of the earnings came from the division that includes refining and oil trading, underscoring the importance of fuel-production margins to the company’s results.

For trucking companies and other fuel users, refining margins are an important part of the price structure behind diesel and gasoline. The margin reflects the difference between the cost of crude oil and the value of the refined products made from it, including diesel, gasoline and jet fuel. When refining capacity is limited or demand for those products is strong, the margin can expand sharply.

BP’s refining margin indicator climbed to $46.70 a barrel in the third quarter, compared with $29.60 in the previous quarter. Its refineries also operated at a higher rate, with availability rising above 96 percent.

The company’s strong results came during a broader period of elevated profitability for major European oil companies. Refinery disruptions and interruptions to oil trade routes linked to conflicts involving Iran and Russia have reduced the amount of global capacity available to convert crude into finished fuels, according to the information released with BP’s results.

That tighter supply has supported higher prices for refined products and increased the earnings of refineries that remain in operation. It also affects the fuel market faced by carriers, where wholesale diesel prices are influenced not only by crude oil prices but also by regional refining capacity, inventories, transportation costs and demand for finished fuel.

BP’s improved cash flow helped reduce its net debt to $13.87 billion, down from $22.3 billion a year earlier. Debt reduction is a central part of the company’s current financial plan as it works to strengthen its balance sheet.

The company also said it intends to address its remaining financial obligations from the 2010 Deepwater Horizon oil spill earlier than required and in full. BP owes about $6.8 billion through 2033 under annual payments connected to the disaster.

“We will use the cash flow we’re generating this year to address all of the remaining liabilities,” Chief Financial Officer Kate Thomson told journalists during a call.

The company’s progress on debt and other obligations comes as Chief Executive Officer Meg O’Neill prepares to present a longer-term strategy in December. BP has not yet indicated how that plan will affect the company’s future spending, operations or shareholder returns.

The results place BP in the same broader industry environment as several of its European competitors. Shell recently said it would raise its quarterly share buyback to $5 billion from $3 billion after reporting stronger refining margins and improved earnings. TotalEnergies has pledged as much as $2.5 billion in buybacks for the quarter, while Repsol and Eni have also increased shareholder distributions.

For BP, however, the immediate focus remains on using the refinery-driven cash flow to reduce debt and settle its remaining Deepwater Horizon commitments. The sharp improvement in earnings gives the company more financial flexibility, but the quarter’s results were heavily influenced by refining and trading conditions that can change with fuel demand, crude supplies, refinery outages and global trade disruptions.