If you happen to personal BP (LSE:BP.) shares like me, you’ll most likely have taken an curiosity within the oil and gasoline producer’s third quarter (Q3 2025) outcomes launched this morning (4 November).
In some respects, there ought to be no main surprises. That’s as a result of the group all the time releases a pre-trading assertion replace – two or three weeks prematurely — that offers a high-level overview of what to anticipate. The important thing numbers are the realised costs for the oil and gasoline that it sells. Its margin can also be necessary.
As a rule of thumb, a $1 motion in Brent crude impacts the group’s pre-tax substitute value working revenue (its most popular measure of earnings) by $340 (up or down). A $0.10 change within the Henry Hub gasoline value will have an effect on its backside line by $40m. And for each $1 variation within the refining indicator margin, the group’s consequence shall be impacted by $550m.
Given the size of BP’s operations, it’s clear that comparatively small modifications in these can have a big influence on its revenue. Nonetheless, all of those are largely outdoors the corporate’s management. That’s one of many the explanation why shares within the sector will be dangerous.
What did the outcomes present?
In comparison with the earlier quarter, BP reported a 6.1% fall in underlying substitute value revenue to $2.21bn. Nonetheless, this was 9.4% higher than analysts had been predicting.
On a per share foundation, the drop was 5.2%, which is an indication that the group’s current share buyback programmes are working. One other $750m of purchases was introduced at present.
However I’m notably excited about whether or not there are indicators that the group’s new technique is working. Beneath strain from a few of its bigger shareholders, BP introduced a change of strategy in February, to attempt to enhance money stream and cut back debt. Alongside disposing of some non-core property, the group stated – a lot to the horror of environmentalists – that it will enhance its funding in hydrocarbons on the expense of low carbon applied sciences. Slicing overheads was additionally stated to be a prime precedence.
Nonetheless, distribution and administrative bills had been $29m extra throughout Q3 2025. The truth is, they had been equal to 13.7% of gross sales and different working earnings. By comparability, Shell’s ratio was 4.8%.
And though working money stream was $1.52bn (24.2%) greater quarter-on-quarter, at September, web debt was $1.79bn (7.4%) greater than a 12 months in the past.
My verdict
To be sincere, I feel it’s a bit of too early to inform whether or not the introduced modifications are having an influence. The group’s chief govt says it’s making “good progress” and “shifting at tempo”. Importantly, he says the group’s demonstrating that it “can and can do higher for our traders”.
However I’m a long-term investor so I’m joyful to attend for additional proof of a turnaround. And financial institution its above-average dividend within the meantime. Regardless of this, I don’t wish to purchase any extra shares for the time being. I feel holding an excessive amount of of 1 specific inventory can be a nasty thought.
Nonetheless, I nonetheless suppose it may very well be one for others to contemplate. If BP can turn into extra environment friendly then its money place ought to enhance relative to its friends. And if it will possibly display this to the satisfaction of traders, I consider its share value will reply positively.
