BP suffers a 40% profits drop

Oil major BP attempted to reassure investors that it will be able to maintain its dividend, as it unveiled a 40% drop in underlying profits.

Oil major BP attempted to reassure investors that it will be able to maintain its dividend, as it unveiled a 40% drop in underlying profits over the last quarter. In the three months to the end of September, BP's profit fell to $1.8bn (£1.2bn) significantly lower than the $3bn reported in the same period last year. The results are a direct impact of collapsing oil prices: Brent crude has fallen from $90 a barrel a year ago to roughly $47 today.

BP's chief executive, Bob Dudley, said that the company can maintain the dividend if prices recover to $60 a barrel by 2017. Even if they remain lower, the firm could weather the storm by further cutting costs, he claimed. BP has already made $3bn in cost savings this year, including laying off staff: headcount will have fallen by 4,000 by year end.

What the commentators said

Hence while BP had previously been among the more pessimistic in the industry with its oil price assumptions, that's no longer the case, said Sarah Kent in the Wall Street Journal. It's now well "within the scope of current forecasts".

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Still, there are other factors that come into play for vertically integrated firms such as BP. "Low oil prices are not all bad news for integrated oil companies," said the BBC's Kamal Ahmed. Yes, it's tough for their upstream business (the exploration and production divisions, which find and extract crude oil). But it can provide a substantial boost for their downstream business, which refine crude into fuels such as gasoline and diesel, and make the petro chemicals that go into things such as paint and plastic. It's notable that while BP's upstream profit slumped from $3.9bn to $800m, its downstream profit climbed from $980m to $2.3bn.

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Natalie joined MoneyWeek in March 2015. Prior to that she worked as a reporter for The Lawyer, and a researcher/writer for legal careers publication the Chambers Student Guide. 

She has an undergraduate degree in Politics with Media from the University of East Anglia, and a Master’s degree in International Conflict Studies from King’s College, London.