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BP plc (BP) Misses Q4 Earnings on Weak Refining Margin
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British energy giant BP plc (BP - Free Report) reported lower-than-expected fourth-quarter 2016 earnings primarily owing to weaker refining margins, partially offset by higher liquid realizations and considerable lower exploration cost.
The company reported fourth-quarter 2016 adjusted earnings of 13 cents per American Depositary Share (ADS) on a replacement cost basis, excluding non-operating items. The bottom line came in below the Zacks Consensus Estimate of 16 cents per share but improved from the year-ago earnings of 6 cents.
BP's total revenue was $52,121 million in the quarter. The top line not only increased from the year-ago level of $49,233 million but also surpassed the Zacks Consensus Estimate of $48,356 million.
Operational Performance
Upstream
For the fourth quarter, total production declined almost 5.5% year over year to 2.186 million barrels of oil equivalent per day (MMBoe/d). Reduction in output from Europe led to the underperformance.
The company sold liquids at $43.89 per barrel in the fourth quarter as against $38.91 in the year-earlier quarter. It sold natural gas at $3.08 per thousand cubic feet compared with $3.47 a year ago. Overall price realization increased to $31.40 per Boe from the year-ago level of $30.34 per Boe.
After adjusting for non-operating items and fair value accounting effects, the underlying replacement cost profit before interest and tax for the segment was $400 million. In the comparable year-ago quarter, the segment had incurred loss of $728 million.
The outperformance was driven by increased liquid price realization as well as significantly lower exploration expenses and rig cancellation charges.
Downstream
Segmental profits slipped to $877 million from $1,218 million in the year-ago quarter. The deterioration is attributable to weaker refining margins and decreased refinery throughput.
Refining Marker Margin decreased to $11.40 per barrel from $13.20 per barrel in the fourth quarter of 2015. Total refinery throughput decreased to 1,644 thousand barrels per day (MB/d) from 1,714 MB/d in the year-earlier period. Refining availability was 94.9% compared with 95.5% in the year-ago period.
Rosneft
The Rosneft segment includes equity-accounted earnings from associates, representing BP’s stake in the former. The segment reported profits of $135 million compared with $235 million in the year-ago quarter.
Financials
BP's net debt was $35,513 million at the end of the fourth quarter compared with $27,158 million in the year-ago quarter. Net debt-to-capitalization ratio was 26.8% as against 21.6% a year ago.
Company Outlook
BP expects production during first-quarter 2017 to be higher than the October–December quarter of 2016 due to the renewal of the Abu Dhabi concession. For 2017, the company projects improved year-over-year output level, subject to conditions like timely project start-ups as well as acquisition and divestment works.
For first-quarter 2017, the company anticipates refining margin to remain flat with fourth-quarter 2016. The turnaround activities during the January–March quarter of 2017 are likely to be lower than the prior quarter.
Share Performance
In the last three months, BP’s shares underperformed the Zacks categorized Oil & Gas-International Integrated industry. During the aforesaid period, shares of the company gained 5.3% compared with a 5.5% improvement for the broader industry.
Zacks Rank
BP currently has a Zacks Rank #3 (Hold). Some better-ranked players in the energy sector include Imperial Oil Limited (IMO - Free Report) , Northern Oil and Gas, Inc. (NOG - Free Report) and Denbury Resources Inc. . All the stocks sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
In 2017, Imperial Oil’s earnings is anticipated to grow 386.6%.
Suncor posted an average earnings surprise of 81.35% in the last four quarters.
Denbury surpassed the Zacks Consensus Estimate in each of the last four quarters with an average earnings surprise of 283.33%.
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BP plc (BP) Misses Q4 Earnings on Weak Refining Margin
British energy giant BP plc (BP - Free Report) reported lower-than-expected fourth-quarter 2016 earnings primarily owing to weaker refining margins, partially offset by higher liquid realizations and considerable lower exploration cost.
The company reported fourth-quarter 2016 adjusted earnings of 13 cents per American Depositary Share (ADS) on a replacement cost basis, excluding non-operating items. The bottom line came in below the Zacks Consensus Estimate of 16 cents per share but improved from the year-ago earnings of 6 cents.
BP's total revenue was $52,121 million in the quarter. The top line not only increased from the year-ago level of $49,233 million but also surpassed the Zacks Consensus Estimate of $48,356 million.
Operational Performance
Upstream
For the fourth quarter, total production declined almost 5.5% year over year to 2.186 million barrels of oil equivalent per day (MMBoe/d). Reduction in output from Europe led to the underperformance.
The company sold liquids at $43.89 per barrel in the fourth quarter as against $38.91 in the year-earlier quarter. It sold natural gas at $3.08 per thousand cubic feet compared with $3.47 a year ago. Overall price realization increased to $31.40 per Boe from the year-ago level of $30.34 per Boe.
After adjusting for non-operating items and fair value accounting effects, the underlying replacement cost profit before interest and tax for the segment was $400 million. In the comparable year-ago quarter, the segment had incurred loss of $728 million.
The outperformance was driven by increased liquid price realization as well as significantly lower exploration expenses and rig cancellation charges.
Downstream
Segmental profits slipped to $877 million from $1,218 million in the year-ago quarter. The deterioration is attributable to weaker refining margins and decreased refinery throughput.
Refining Marker Margin decreased to $11.40 per barrel from $13.20 per barrel in the fourth quarter of 2015. Total refinery throughput decreased to 1,644 thousand barrels per day (MB/d) from 1,714 MB/d in the year-earlier period. Refining availability was 94.9% compared with 95.5% in the year-ago period.
Rosneft
The Rosneft segment includes equity-accounted earnings from associates, representing BP’s stake in the former. The segment reported profits of $135 million compared with $235 million in the year-ago quarter.
Financials
BP's net debt was $35,513 million at the end of the fourth quarter compared with $27,158 million in the year-ago quarter. Net debt-to-capitalization ratio was 26.8% as against 21.6% a year ago.
Company Outlook
BP expects production during first-quarter 2017 to be higher than the October–December quarter of 2016 due to the renewal of the Abu Dhabi concession. For 2017, the company projects improved year-over-year output level, subject to conditions like timely project start-ups as well as acquisition and divestment works.
For first-quarter 2017, the company anticipates refining margin to remain flat with fourth-quarter 2016. The turnaround activities during the January–March quarter of 2017 are likely to be lower than the prior quarter.
Share Performance
In the last three months, BP’s shares underperformed the Zacks categorized Oil & Gas-International Integrated industry. During the aforesaid period, shares of the company gained 5.3% compared with a 5.5% improvement for the broader industry.
Zacks Rank
BP currently has a Zacks Rank #3 (Hold). Some better-ranked players in the energy sector include Imperial Oil Limited (IMO - Free Report) , Northern Oil and Gas, Inc. (NOG - Free Report) and Denbury Resources Inc. . All the stocks sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
In 2017, Imperial Oil’s earnings is anticipated to grow 386.6%.
Suncor posted an average earnings surprise of 81.35% in the last four quarters.
Denbury surpassed the Zacks Consensus Estimate in each of the last four quarters with an average earnings surprise of 283.33%.
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In this latest Special Report, Zacks’ Aggressive Growth Strategist Brian Bolan explores a full-blown technological breakthrough in the making – autonomous cars. He also spotlights 8 stocks with tremendous gain potential to feed off this phenomenon. Click to see the stocks right now >>