Energy giant and LNG player BP reported a net loss in the third quarter, while its underlying profit rose on the back of higher oil and gas prices.
BP revealed a loss of $2.5 billion, compared with a $3.1 billion profit for the prior quarter, and a loss of $450 million in the same quarter a year ago.
The firm said the loss reflected “significant adverse fair value accounting effects of $6.1 billion pre-tax, primarily due to the exceptional increase in forward gas prices towards the end of the quarter.”
Under IFRS, reported earnings include the mark-to-market value of the hedges used to risk-manage LNG contracts, but not of the LNG contracts themselves, BP said.
“This mismatch at the end of the third quarter is expected to unwind if prices decline and as the cargoes are delivered,” it said.
Also, underlying replacement cost profit reached $3.3 billion, compared with $2.8 billion for the previous quarter and $86 million in the third quarter last year.
BP attributed the rise to “higher oil and gas realizations, higher refining availability and throughput enabling the capture of a stronger environment and a stronger gas marketing and trading result.”
Operating cash flow of $6 billion included a working capital build of $1.8 billion.
Chief executive Bernard Looney said this had been “another good quarter” for BP.
“Rising commodity prices certainly helped, but I am most pleased that quarter by quarter, we’re doing what we said we would – delivering significant cash to strengthen our finances, grow distributions to shareholders and invest in our strategic transformation. This is what we mean by performing while transforming,” he said.