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BP Q3 Earnings Trump Estimates on Key Upstream Projects

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BP plc (BP - Free Report) reported third-quarter 2019 adjusted earnings of 66 cents per American Depositary Share (ADS) on a replacement cost basis, excluding non-operating items. The bottom line surpassed the Zacks Consensus Estimate of 53 cents but deteriorated from the year-ago quarter’s $1.15.

Total revenues of $69,292 million declined from $80,803 million in the year-ago quarter and missed the Zacks Consensus Estimate of $78,859 million.

Oil equivalent volumes from key upstream projects primarily contributed to the better-than-expected earnings performance. This was however partially offset by lower refinery throughput outside the United States and Europe.

Operational Performance

Upstream

In the third quarter, total production of 2.568 million barrels of oil equivalent per day (MMBoe/d) was higher than 2.460 MMBoe/d in the year-ago quarter. Key upstream projects primarily drove quarterly production volumes. 

The company sold liquids at $55.68 a barrel in the third quarter compared with $69.68 in the prior-year quarter. Moreover, it sold natural gas at $3.11 per thousand cubic feet compared with $3.86 in the year-ago quarter. Overall price realization fell to $35.48 per barrels of oil equivalent (Boe) from the year-ago quarter’s level of $46.14.

After adjusting for non-operating items and fair value accounting effects, underlying replacement cost profit before interest and tax for the segment amounted to $2,139 million. The figure deteriorated from $3,999 million in the year-ago quarter. Lower realized prices from oil equivalent barrels of liquids primarily caused the downside.  

Downstream

Segmental profits declined to $1,883 million from $2,111 million in the year-ago quarter, thanks to lower refinery throughput outside the United States and Europe.

Refining marker margin of $14.7 per barrel in the third quarter was flat with the year-earlier quarter. Moreover, total refinery throughput increased to 1,813 thousand barrels a day (MB/d) from 1,793 MB/d in the prior-year quarter. Notably, although the United States and Europe reported higher refinery throughputs, the company’s throughputs were lower in the rest of the world.

Refining availability was 96.1% compared with 96.4% in the year-earlier quarter.  

Rosneft

Profits at the segment amounted to $802 million, down from $872 million in the year-ago quarter. 

Financials

BP's net debt, including leases, was $55,936 million at the end of the third quarter, higher than $39,177 million in the prior-year quarter. Gearing was recorded at 31.7%, up from 27.1% in the prior-year quarter.    

Oil Spill Costs

Through the first nine months of 2019, the integrated energy firm made a payment of $2.5 billion, after tax, associated with the oil spill incident in the Gulf of Mexico.

Outlook

The company expects oil and natural gas production in the fourth quarter of 2019 to rise sequentially. However, BP projects a decline in industry refining margins through the December quarter.

Zacks Rank & Stocks to Consider

BP currently carries a Zacks Rank #3 (Hold). Meanwhile, a few better-ranked players in the energy space are Crescent Point Energy Corp. (CPG - Free Report) , Matrix Service Company (MTRX - Free Report) and Pembina Pipeline Corporation (PBA - Free Report) . All the stocks sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.     

Crescent beat the Zacks Consensus Estimate in three of the prior four quarters, the average positive earnings surprise being 235.1%.

Matrix Service has managed to beat the Zacks Consensus Estimate for earnings in three of the past four quarters.

Pembina Pipeline has an average positive earnings surprise of 28.1% for the past four quarters.

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