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BP plc (BP) Q4 Earnings Miss Estimates, Skyrocket Y/Y

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BP plc (BP - Free Report) reported a year-over-year rise in fourth-quarter 2017 earnings, courtesy of record oil and gas production and higher commodity price realizations. Increased refinery throughput also drove earnings, partially offset by increased exploration expenses.

Royal Dutch Shell (RDS.A - Free Report) is another European energy giant that reported a significant hike in fourth-quarter profits on Feb 1.

BP reported fourth-quarter adjusted earnings of 64 cents per American Depositary Share (ADS) on a replacement cost basis, excluding non-operating items. The bottom line missed the Zacks Consensus Estimate of 66 cents but was significantly higher than year-ago quarter’s 13 cents.

Total revenues were $70,022 million in the quarter, up from $52,121 million in the year-ago quarter.

Operational Performance

Upstream

In the fourth quarter, total production inched up 18% year over year to 2.581 million barrels of oil equivalent per day (MMBoe/d). Key developments ramp-up primarily aided the record volume. Notably, since the January-to-March quarter of 2011, the fourth quarter output has been the highest.

The company sold liquids at $56.16 a barrel in the fourth quarter as compared with $43.89 in the year-earlier quarter. It sold natural gas at $3.23 per thousand cubic feet, compared with $3.08 a year ago. Overall price realization increased to $37.48 per barrels of oil equivalent (Boe) from the year-ago level of $31.40.   

After adjusting for non-operating items and fair value accounting effects, underlying replacement cost profit before interest and tax for the segment was $2,223 million, up from $400 million in the year-ago quarter. Increased realized prices from oil and natural gas and record volumes primarily drove the upside.

Downstream

Segmental profits improved to $1,474 million from $877 million in the year-ago quarter, courtesy of higher refinery throughput.

Refining Marker margin of $14.4 per barrel in the fourth quarter of 2017 was up from $11.4 in the year-ago quarter. Total refinery throughput rose to 1,698 thousand barrels per day (MB/d) from 1,644 MB/d in the year-earlier quarter. Refining availability was 96.1%, compared with 94.9% in the year-ago quarter.

Rosneft

The segment recorded profits of $321 million, compared with $135 million in the year-ago quarter. 

Exploration Expenses

For the fourth quarter, BP reported exploration costs of $521 million, up almost 70% from $314 million in the year-ago quarter.

Financials

BP's net debt was $37,819 million at the end of the fourth quarter, compared with $35,513 million in the year-ago quarter. Net debt-to-capitalization ratio was 27.4% as compared with 26.8% a year ago.

Q4 Price Performance

During fourth-quarter 2017, BP gained 9.4%, outperformed the industry’s 6.6% rally.

 

Outlook

Ramp up of key developments convinced BP to project higher year-over-year production through 2018. For the January-to-March quarter of 2018, the integrated energy player expects output to remain in line sequentially.  

Zacks Rank & Other Key Picks

BP has a Zacks Rank #2 (Buy). Other top-ranked players in the energy sector are Statoil ASA (STO - Free Report) and Pioneer Natural Resources (PXD - Free Report) . Both the stocks sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Headquartered in Stavanger, Norway, Statoil is a major international integrated energy player. The company is expected to witness year-over-year earnings growth of 17.1% in 2018.

Headquartered at Irving, TX, Pioneer Natural Resources is an upstream energy firm. The company delivered an average positive earnings surprise of 67.6% for the preceding four quarters.

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