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British energy giant, BP plc (BP - Free Report) reported better-than-expected third-quarter 2016 results owing to reduced costs on the back of simplification and efficiency activities. However, lower commodity prices realizations and weak refining margins partially limited the upside.
The company reported third-quarter 2016 adjusted earnings of 30 cents per American Depositary Share (ADS) on a replacement cost basis, excluding non-operating items. The bottom line came in above the Zacks Consensus Estimate of 22 cents per share but declined from the year-ago earnings of 60 cents.
BP's total revenue was $48,043 million in the quarter as against the year-ago level of $57,301 million. However, the top line surpassed the Zacks Consensus Estimate of $46,024 million.
Operational Performance
Upstream
For the third quarter, total production declined almost 5% year over year to 2.110 million barrels of oil equivalent per day (MMBoe/d). This was owing to the Pascagoula plant outage in the Gulf of Mexico as well as seasonal turnaround activities.
The company sold liquids at $41.23 per barrel in the third quarter (as against $44.01 in the year-earlier quarter) and natural gas at $2.77 per thousand cubic feet (as against $3.49). Overall price realization fell to $29.46 per Boe from the year-ago level of $33.25 per Boe.
After adjusting for non-operating items and fair value accounting effects, the underlying replacement cost loss before interest and tax for the segment was $224 million. In the comparable year-ago quarter, the segment had generated profits of $823 million.
The underperformance stemmed from decreased oil and gas prices realizations as well as increased cancellation expenses from the rigs. The negatives were partially mitigated by reduced costs on the back of simplification and efficiency works.
Downstream
Segmental profits decreased to $1,431 million from $2,302 million in the year-ago quarter. The deterioration is attributable to weaker refining margins and increased turnaround activities.
Refining Marker Margin decreased to $11.6 per barrel from $20 per barrel in the third quarter of 2015. Total refinery throughput decreased to 1,650 thousand barrels per day (MB/d) from 1,696 MB/d in the year-earlier period. Refining availability was 95.4% compared with 94.9% in the year-ago period.
Rosneft
The Rosneft segment includes equity-accounted earnings from associates, representing BP’s stake in the former. The segment made profits of $120 million compared with $382 million in the year-ago quarter.
Financials
BP's net debt was $32,364 million at the end of the third quarter compared with $25,646 million in the year-ago quarter. Net debt-to-capitalization ratio was 25.9% as against 20% a year ago.
BP expects fourth-quarter 2016 production to be marginally higher than the July–September quarter of this year.
The company anticipates refining margin to remain under pressure and added that there might be increased turnaround activities during the October–December quarter of 2016.
Zacks Rank
BP currently has a Zacks Rank #3 (Hold). Some better-ranked players in the energy sector are Ultra Petroleum Corp. , EQT Midstream Partners, LP and Helix Energy Solutions Group, Inc. (HLX - Free Report) .
Ultra Petroleum is likely to witness year-over-year earnings growth of 351.6% for the current year. The company sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
EQT Midstream is projected to witness year-over-year earnings growth of almost 12% for the current year. It has a Zacks Rank #1.
Helix Energy posted an average positive earnings surprise of 56.42% over the last four quarters. The company has a Zacks Rank #2 (Buy).
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BP plc (BP) Q3 Earnings & Revenues Beat, Down Y/Y
British energy giant, BP plc (BP - Free Report) reported better-than-expected third-quarter 2016 results owing to reduced costs on the back of simplification and efficiency activities. However, lower commodity prices realizations and weak refining margins partially limited the upside.
The company reported third-quarter 2016 adjusted earnings of 30 cents per American Depositary Share (ADS) on a replacement cost basis, excluding non-operating items. The bottom line came in above the Zacks Consensus Estimate of 22 cents per share but declined from the year-ago earnings of 60 cents.
BP's total revenue was $48,043 million in the quarter as against the year-ago level of $57,301 million. However, the top line surpassed the Zacks Consensus Estimate of $46,024 million.
Operational Performance
Upstream
For the third quarter, total production declined almost 5% year over year to 2.110 million barrels of oil equivalent per day (MMBoe/d). This was owing to the Pascagoula plant outage in the Gulf of Mexico as well as seasonal turnaround activities.
The company sold liquids at $41.23 per barrel in the third quarter (as against $44.01 in the year-earlier quarter) and natural gas at $2.77 per thousand cubic feet (as against $3.49). Overall price realization fell to $29.46 per Boe from the year-ago level of $33.25 per Boe.
After adjusting for non-operating items and fair value accounting effects, the underlying replacement cost loss before interest and tax for the segment was $224 million. In the comparable year-ago quarter, the segment had generated profits of $823 million.
The underperformance stemmed from decreased oil and gas prices realizations as well as increased cancellation expenses from the rigs. The negatives were partially mitigated by reduced costs on the back of simplification and efficiency works.
Downstream
Segmental profits decreased to $1,431 million from $2,302 million in the year-ago quarter. The deterioration is attributable to weaker refining margins and increased turnaround activities.
Refining Marker Margin decreased to $11.6 per barrel from $20 per barrel in the third quarter of 2015. Total refinery throughput decreased to 1,650 thousand barrels per day (MB/d) from 1,696 MB/d in the year-earlier period. Refining availability was 95.4% compared with 94.9% in the year-ago period.
Rosneft
The Rosneft segment includes equity-accounted earnings from associates, representing BP’s stake in the former. The segment made profits of $120 million compared with $382 million in the year-ago quarter.
Financials
BP's net debt was $32,364 million at the end of the third quarter compared with $25,646 million in the year-ago quarter. Net debt-to-capitalization ratio was 25.9% as against 20% a year ago.
BP PLC Price, Consensus and EPS Surprise
BP PLC Price, Consensus and EPS Surprise | BP PLC Quote
Company Outlook
BP expects fourth-quarter 2016 production to be marginally higher than the July–September quarter of this year.
The company anticipates refining margin to remain under pressure and added that there might be increased turnaround activities during the October–December quarter of 2016.
Zacks Rank
BP currently has a Zacks Rank #3 (Hold). Some better-ranked players in the energy sector are Ultra Petroleum Corp. , EQT Midstream Partners, LP and Helix Energy Solutions Group, Inc. (HLX - Free Report) .
Ultra Petroleum is likely to witness year-over-year earnings growth of 351.6% for the current year. The company sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
EQT Midstream is projected to witness year-over-year earnings growth of almost 12% for the current year. It has a Zacks Rank #1.
Helix Energy posted an average positive earnings surprise of 56.42% over the last four quarters. The company has a Zacks Rank #2 (Buy).
Confidential from Zacks
Beyond this Analyst Blog, would you like to see Zacks' best recommendations that are not available to the public? Our Executive VP, Steve Reitmeister, knows when key trades are about to be triggered and which of our experts has the hottest hand. Click to see them now>>