BP's third-quarter earnings plunged by 41 per cent after the UK energy major was hit by lower oil prices and a fall in production partly triggered by the impact of Hurricane Barry in the US Gulf of Mexico.
In the three months to September 30, underlying replacement cost profits - BP's definition of net income and the measure tracked most closely by analysts - were nearly $2.3bn, versus $3.8bn in the same period in 2018. The group's shares fell by 3 per cent on Tuesday.
BP is the first of the so-called supermajors to report its earnings, with an energy price slump, weaker global demand and contracting chemicals industry margins weighing on the oil sector.
Its earnings were still ahead of analysts' estimates of $1.7bn. Expectations had been cut after the company said this month that it would take an impairment charge following the agreed sale of a parcel of US assets for a lower value than it had on its books. On Tuesday, BP said the charge would be $2.6bn.
Taking account of the impairment charge, other one-off costs and inventory holdings, BP reported a loss of nearly $750m, a sharp decline from $3.3bn a year earlier.
BP warned this month that oil and gas production would be hit by about 100,000 barrels of oil equivalent a day because of maintenance in some high-margin areas and because of weather effects, including July's Hurricane Barry.
The oil group is reconfiguring its US portfolio as part of a broad $10bn divestment programme to strengthen its balance sheet after a blockbuster deal for miner BHP's shale assets in 2018 - BP's biggest acquisition in almost 20 years.
In August, the company announced the sale of its Alaskan business to Hilcorp for $5.6bn. It then said it would sell four packages of legacy gas assets from its US shale business, without disclosing the buyer or the price.
Brian Gilvary, chief financial officer, on Tuesday said BP was "very bearish" on natural gas prices through to 2021. "We don't think this is going to get better over the next 2-3 years," he added, explaining that this was why the company had decided to proceed with the sales, largely to private equity buyers. "Strategically we wanted to get out," he said.
This month, BP announced that its head of exploration and production, Bernard Looney, would take over as chief executive from Bob Dudley in February 2020. Mr Gilvary, who was also gunning for the top job, said he was planning on "sticking around". He added: "I wasn't planning on any sudden changes right now."
Oil and gas production for the quarter, excluding output from BP's stake in Russia's Rosneft, was down 2.5 per cent versus last year at 2.6m boe/d.
Although profits came under pressure, operating cash flow was $6.5bn in the third quarter, excluding Gulf of Mexico oil spill payments.
BP's oil trading division was able to offset some of the negative impacts elsewhere in the business, including lower refining margins.
Analysts have been focusing on BP's debt levels since the BHP deal. Gearing - which BP defines as net debt divided by the sum of net debt plus equity - rose to nearly 32 per cent in the third quarter, one of the highest in the sector.
BP reiterated that it would remain above its target 20 per cent to 30 per cent range through 2019, which some analysts have said could hinder its ability to return cash to shareholders in the form of increased dividends and buybacks.
The company also narrowed its guidance for capital expenditure this year from $15bn-$17bn to "under $16bn".
BP announced a dividend of 10.25 cents per ordinary share.
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