BP plc (BP - Free Report) recently announced that third-quarter production levels were dented by turnaround activities in some of the high-margin regions served. Moreover, in mid-July, output from the U.S. Gulf of Mexico was affected by Hurricane Barry that caused the closure of its facilities for almost 14 days. The company’s third-quarter production level was cut by 100 thousand barrels of oil equivalent per day (MBoe/d). The lower production may have affected its revenues in third-quarter 2019.
The company also stated that it had commenced a $10-billion asset divestment program — following a $10.25-billion acquisition of BHP’s onshore assets in 2018 — that was primarily scheduled to be completed in 2020. Given the pace of divestments, the company is now expected to reach its target by 2019-end.
The divestment program incorporates the sale of its Alaskan properties for $5.6 billion to Hilcorp and vending of four legacy U.S. gas assets to undisclosed parties. Owing to the divestments, the company recorded an impairment charge of $2-$3 billion in third-quarter 2019. The move is expected to offset some of its debt burden, which surged following the acquisition of BHP assets. Notably, BP currently has a debt-to-capitalization of 39.3%, way above the industry average of 21.2%.
The move is expected to strengthen the company’s balance sheet and financial flexibility, which can support upstream growth projects in the pipeline. BP has plans to bring a total of 35 major upstream projects online by 2021. Notably, the British energy giant has brought 23 projects in service so far, including four this year.
BP has lost 1.2% year to date compared with 2.5% fall of the industry it belongs to.
Zacks Rank and Stocks to Consider
Currently, BPcarries a Zacks Rank #3 (Hold). Some better-ranked players in the energy space are Matrix Service Company (MTRX - Free Report) , Holly Energy Partners, L.P. (HEP - Free Report) and Pembina Pipeline Corp. (PBA - Free Report) . While Matrix Service sports a Zacks Rank #1 (Strong Buy), Holly Energy and Pembina hold a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Matrix Service’s 2019 earnings per share are expected to rise 58.4% year over year.
Holly Energy Partners’ 2019 earnings per share are expected to rise 8.8% year over year.
Pembina’s 2019 earnings per share are expected to rise 21.5% year over year.
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