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BP profits double, spurred by stronger oil prices

The British oil and gas supermajor posted massive profits in its third-quarter that have allowed the company to finance its acquisition of BHP shale assets in cash.

BP
Source: Bloomberg

BP (LON:BP) saw its underlying replacement cost profit for the third-quarter 2018 (Q3 18) hit $3.8 billion, more than doubling the $1.9 billion recorded a year prior, with proceeds helping the oil and gas supermajor to finance its acquisition of BHP Billiton’s (LON:BLT) US shale assets in cash.

The British oil and gas company first agreed to acquire the US shale assets from BHP in late-July for around $10.5 billion, with the aim to expand its geographical footprint and increase production in what is one of the largest deals the business has done in nearly two decades.

‘Our focus on safe and reliable operations and delivering our strategy is driving strong earnings and growing cash flow,’ Group CEO Bob Dudley said. ‘Operations are running well across BP and we’re bringing new, higher-margin barrels into production faster through efficient project execution.’

‘We have made very good progress with our acquisition from BHP and expect to complete the transaction tomorrow,’ he said.

‘This will transform our position in the US Lower 48 and we expect it to create significant value for BP,’ he added.

Gulf of Mexico oil spill

A strong set of results and the completion of its acquisition will please investors, who have endured the fallout from the Deepwater Horizon oil rig disaster in the Gulf of Mexico in 2010, with the business still paying down penalties valued at over $65 billion.

Operating cash flow (excluding Gulf of Mexico oil spill payments) for Q3 18 stood at $6.6 billion, with the company paying $500 million in penalties to the US government in the quarter.

The Thunder Horse Northwest expansion project in the Gulf of Mexico and the Western Flank B project in Australia began production in October, both ahead of schedule. They are BP’s fourth and fifth Upstream major projects to start up in 2018.

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This information has been prepared by IG, a trading name of IG Markets Limited and IG Markets South Africa Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. International accounts are offered by IG Markets Limited in the UK (FCA Number 195355), a juristic representative of IG Markets South Africa Limited (FSP No 41393). South African residents are required to obtain the necessary tax clearance certificates in line with their foreign investment allowance and may not use credit or debit cards to fund their international account.