BP beats third-quarter forecasts with record $8.46 billion profit

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 energy prices and refining margins, and said it would use the windfall to settle its remaining Deepwater Horizon liabilities.

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 reported third-quarter underlying replacement cost profit — its version of net income — of $8.46 billion, compared with analysts' expectations of $7.33 billion in a company-provided poll, and $2.2 billion a year earlier.

That was the highest quarterly net profit posted under BP's current version of the parameter.

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.

STRATEGY RESET

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

"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," CEO Meg O'Neill said in a statement.

BP shares were up 1.2% in early trade, outpacing a 0.1% rise for a broader index of European energy companies.

"BP has continued its streak of beating expectations and demonstrating it is highly leveraged to the macro environment," said RBC analyst Biraj Borkhataria in a note. "Operational indicators and controllables look strong."

SURPLUS CASH FROM WAR

The US-Israeli war on Iran has driven up oil and fuel prices and boosted refining margins, prompting questions over how oil majors will deploy the additional cash generated by the sector.

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, according to the most recent BP data.

All three of BP's business units beat expectations. Its customer and products division delivered the strongest outperformance, reporting pretax profit of $6.95 billion, above analysts' average estimate of $6.3 billion and up from $1.72 billion a year earlier.

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 transition businesses. In recent months, BP wrote down over $5 billion, mainly related to Archaea, its solar unit Lightsource BP and other low-carbon ventures.

The firm will hold a strategy update on December 15.

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