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BP Posts In-Line Q2 Earnings, Expects $3B Oil Spill Payment

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BP plc (BP - Free Report) reported second-quarter 2018 adjusted earnings of 85 cents per American Depositary Share (ADS) on a replacement cost basis, excluding non-operating items. The bottom line matched the Zacks Consensus Estimate and improved from the year-ago quarter’s 21 cents.

Total revenues were $76,907 million in the quarter, up from $57,366 million in the year-ago quarter.  

The increase in oil equivalent price realizations, ramped up key upstream projects and massive crude processing volumes drove second-quarter results.

Share Repurchase & Dividend

The integrated energy major continued to return cash to shareholders through buybacks and dividend payments. Through second-quarter 2018, BP spent $80 million on the repurchase of 11 million shares. Notably, after 15 quarters, the British energy giant managed to raise its quarterly dividend by 2.5% to 10.25 cents per ordinary share. 

Royal Dutch Shell (RDS.A - Free Report) is another European energy giant strongly committed to reward shareholders. The company will likely repurchase at least $25 billion in common stock in the period 2018-2020.

Operational Performance

Upstream

In the second quarter, total production rose 2% year over year to 2.465 million barrels of oil equivalent per day (MMBoe/d). Ramp-up in key developments primarily aided the rise.

The company sold liquids at $67.24 a barrel in the second quarter as compared with $46.27 in the year-earlier quarter. It sold natural gas at $3.65 per thousand cubic feet, compared with $3.19 a year ago. Overall price realization increased to $43.37 per barrels of oil equivalent (Boe) from the year-ago level of $33.59.

After adjusting for non-operating items and fair value accounting effects, underlying replacement cost profit before interest and tax for the segment was $3,508 million, considerably higher than $710 million a year ago. Increased realized prices from oil and natural gas and rising volumes primarily drove the upside.

Downstream

Segmental profits improved to $1,455 million from $1,413 million in the year-ago quarter. The Whiting refinery processed massive crude volumes that primarily attributed to the growth.

Refining marker margin of $14.9 per barrel in the second quarter of 2018 was higher than 13.8 in the year-ago quarter. However, total refinery throughput fell to 1,680 thousand barrels a day (MB/d) from 1,688 MB/d in the year-earlier quarter.

Refining availability was 93.3%, compared with 94.5% in the year-ago quarter.  

Rosneft

The segment recorded profits of $766 million, up from $279 million a year ago. 

Exploration Expenses

For the second quarter, BP reported exploration costs of $164 million, down almost 81% from $850 million in the year-earlier quarter.

Financials

BP's net debt was $39,277 million at the end of the second quarter, nominally lower than $39,794 million a year ago. Net debt ratio was 27.8%, slightly below 28.8% in the prior-year quarter.    

Oil Spill Costs

Through the first half of 2018, the integrated energy firm made a payment of $2.4 billion, after tax, associated with the oil spill incident in the Gulf of Mexico. For 2018, BP projects total payment to be marginally more than $3 billion.    

Outlook

For the July-to-September quarter of 2018, the company expects oil and natural gas production to be mostly flat sequentially, thanks to the maintenance and turnaround activity. BP added that the turnaround works will hurt third-quarter 2018 refining margins.

BP p.l.c. Price, Consensus and EPS Surprise

 

BP p.l.c. Price, Consensus and EPS Surprise | BP p.l.c. Quote

Zacks Rank & Other Stocks to Consider

BP carries a Zacks Rank #2 (Buy). Other prospective players in the energy space are McDermott International, Inc. (MDR - Free Report) and Murphy Oil Corp. (MUR - Free Report) . While Murphy Oil carries a Zacks Rank #2, McDermott sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here

McDermott’s earnings beat the Zacks Consensus Estimate in three of the last four quarters, the average positive surprise being 73.6%.

Murphy Oil’s bottom line surpassed the consensus mark in each of the last four quarters, the average positive surprise being 102.5%.

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