BP Beats Q3 Earnings Estimates, Projects $3B Oil Spill Cost
BP plc BP reported third-quarter 2018 adjusted earnings of $1.15 per American Depositary Share (ADS) on a replacement cost basis, excluding non-operating items. The bottom line surpassed the Zacks Consensus Estimate of 86 cents and improved from the year-ago quarter’s 57 cents.
Total revenues were $80,803 million in the quarter, up from $60,808 million in the year-ago quarter.
The increase in oil equivalent price realizations and ramped-up key upstream projects drove strong third-quarter results. This also led the stock to gain more than 4% during pre-trading hours.
The integrated energy major continued to return cash to shareholders through buybacks and dividend payments. Through third-quarter 2018, BP spent $139 million on the repurchase of 19 million shares.
Operational Performance
Upstream
In the third quarter, total production of 2.460 million barrels of oil equivalent per day (MMBoe/d) remains where it was a year ago. Ramp-up in key developments backed the quarterly production volumes.
The company sold liquids at $69.68 a barrel in the third quarter as compared with $47.45 a year ago. It sold natural gas at $3.86 per thousand cubic feet, compared with $2.89 a year ago. Overall price realization increased to $46.14 per barrels of oil equivalent (Boe) from the year-ago level of $33.23.
After adjusting for non-operating items and fair value accounting effects, underlying replacement cost profit before interest and tax for the segment was $3,999 million, up from $1,562 million a year ago. Increased realized prices from oil and natural gas primarily drove the upside.
Downstream
Segmental profits declined to $2,111 million from $2,338 million in the year-ago quarter. Lower contributions from fuels and lubricants businesses led to the downstream underperformance.
Refining marker margin of $14.7 per barrel in the third quarter of 2018 was lower than 16.3 in the year-earlier quarter. However, total refinery throughput increased to 1,793 thousand barrels a day (MB/d) from 1,745 MB/d in the year-earlier quarter.
Refining availability was 96.3%, compared with 95.3% in the year-ago quarter.
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The segment recorded profits of $872 million, up from $137 million a year ago.
Financials
BP's net debt was $39,177 million at the end of the third quarter, lower than $39,777 million a year ago. Net debt ratio was 27.5%, below 28.4% in the prior-year quarter.
Oil Spill Costs
Through the nine months of 2018, the integrated energy firm made a payment of $2.9 billion, after tax, associated with the oil spill incident in the Gulf of Mexico. For 2018, BP continues to expect total payment to be slightly higher than $3 billion.
Outlook
For the October-to-December quarter of 2018, the company expects oil and natural gas production to be rise sequentially. BP added that the turnaround works will hurt refining margins in fourth-quarter 2018.
Zacks Rank & Other Stocks to Consider
BP carries a Zacks Rank #2 (Buy). Other prospective players in the energy space are Murphy Oil Corporation MUR, Enbridge Inc ENB and Petroleo Brasileiro S.A. or Petrobras PBR. While Murphy and Enbridge sport a Zacks Rank #1 (Strong Buy), Petrobras carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Murphy has an average positive surprise of 96.5% for the last four quarters.
Enbridge will likely see earnings growth of 42.2% in 2018.
Petrobras’ bottom line beat the Zacks Consensus Estimate in three of the trailing four quarters, the average being 10.4%.
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