BP beats forecasts with record profit, targets early settling of Deepwater Horizon bill

By Stephanie Kelly and Shadia Nasralla

LONDON, Oct 30 (Reuters) - BP posted a record quarterly net profit on Friday, beating expectations as the Iran war boosted prices and refining margins, and said it would use the windfall to settle its remaining Deepwater Horizon liabilities.

The company reported third-quarter underlying replacement cost profit — its version of net income — of $8.46 billion, the highest of any quarter under BP's current version of the parameter. That beat analysts' expectations of $7.33 billion, and was up from $2.2 billion a year earlier.

The results follow high earnings from Shell and TotalEnergies, which also beat quarterly profit expectations on Thursday and chose to raise share buybacks with their cash.

BP said it would use part of the surplus cash to settle its remaining liabilities from the 2010 Deepwater Horizon disaster, when a blow-out on the drilling rig over the BP-operated Macondo well in the Gulf of Mexico became one of the worst oil spills to date, killing 11 people.

The company put aside $69 billion relating to the spill. Related payables and provisions still stand at $5.94 billion under a payment schedule stretching to 2033, according to the most recent BP data and a BP spokesperson.

When asked about the possibility of resuming share buybacks or a higher dividend, CEO Meg O'Neill said BP was still carrying more debt than it can afford in a low price scenario, and was focused on bringing this down to protect the current dividend.

DEBT REDUCTION TARGET REACHED

O'Neill said in a statement the company had maintained oil and gas production at around 2.2 million barrels per day. "Upstream plant reliability and refining availability both improved compared to the previous quarter, and our trading performance was also higher," she added.

"This has generated a strong set of results, supported by the higher-price, higher-margin environment and some good progress on performance improvement across the business."

Operating cash flow came in at $14.8 billion, while net debt fell to $13.9 billion, allowing BP to reach its net debt target a year ahead of schedule.

The milestone marks another step in BP's turnaround after the company reset its strategy in 2025 following an ill-fated push into renewables.

BP shares were up 0.5% at around 1013 GMT, outperforming a 0.2% drop in a broader index of European energy companies. BP shares this month hit their highest since before Deepwater Horizon.

OUTPERFORMANCE ACROSS BOARD

All three of BP's business units beat expectations.

BP's refining indicator margin rose to $46.7 per barrel in the quarter from $29.6 per barrel in the second quarter and $15.8 per barrel a year earlier. The firm also said it had a significantly higher gas marketing and trading result.

The company recorded $4 billion of impairments this quarter, linked largely to its solar business Lightsource BP and offshore wind. In recent months BP has already written down over $5 billion, mainly related to biogas unit Archaea, Lightsource BP and other low-carbon ventures.

The firm will hold a long-term strategy update on December 15.

(Reporting by Stephanie Kelly and Shadia Nasralla. Editing by Joe Bavier, Mark Potter and Jan Harvey)