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BP Tops Q1 Earnings Estimates, Aims to Resume Buybacks in Q2

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BP plc BP reported first-quarter 2021 adjusted earnings of 77 cents per American Depositary Share (ADS) on a replacement cost basis, excluding non-operating items. The bottom line beat the Zacks Consensus Estimate of earnings of 43 cents per share and also improved from the year-ago earnings of 24 cents.

Total revenues of $36,492 million increased from $30,863 million in the year-ago quarter and beat the Zacks Consensus Estimate of $31,415 million.

The strong quarterly results were owing to higher realizations of commodity prices.

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

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

BP p.l.c. price-consensus-eps-surprise-chart | BP p.l.c. Quote

BP’s Operational Performance

Oil Production & Operations:

For the first quarter, total production of 1,309 thousand barrels of oil equivalent per day (MBoe/d) declined from 1,679 MBoe/d in the year-ago quarter. Reduction in capital investments hurt the production level.

BP sold liquids at $52.92 a barrel in the first quarter compared with $47.64 in the prior-year period. Moreover, it sold natural gas at $4.11 per thousand cubic feet compared with $1.44 in the year-ago quarter. Overall price realization rose to $46.81 per Boe from the year-ago level of $37.10.

After adjusting for non-operating items, underlying replacement cost earnings before interest and tax for the segment amounted to $1,565 million. The figure improved significantly from earnings of $895 million in the year-ago quarter. Higher realized commodity prices primarily caused the upside, partially offset by lower production.

Gas & Low Carbon Energy:

Segmental profits surged to $2,270 million from $847 million in the year-ago quarter, primarily due to considerable contributions from gas marketing and trading activities.

Notably, for the first quarter, total production of 909 thousand barrels of oil equivalent per day (MBoe/d) improved from 900 MBoe/d in the year-ago quarter. Contributions from growth projects in India and Oman primarily aided the production level.

Customers & Products:

After adjusting for non-operating items, underlying replacement cost earnings before interest and tax for the segment amounted to $656 million, down from $921 million in the year-ago comparable quarter. The segment was hurt by weaker results from refining activities.

Notably, BP-operated refining availability for the March quarter was reported at 94.8%, reflecting a decline from 96.1% in the year-ago comparable quarter.

Rosneft:

Earnings from the segment amounted to $363 million, comparing favorably with the loss of $17 million in the March quarter of 2020. Higher oil price aided the segment results.

Capex

Organic capital expenditure for the first quarter of 2021 was recorded at $2,906 million. Notably, the company reported total capital spending for the quarter of $3,798 million.

Financials

BP's net debt — including leases — was $42,380 million at first quarter-end versus $60,618 million in the prior-year quarter. Gearing was recorded at 31.9% compared with 40.1% in the prior-year quarter.

Outlook

The British energy giant expects oil demand to recover this year on the rolling out of coronavirus vaccines and the relaxation of social-distancing measures. The company added that the strong growth in the United States and China is aiding oil demand.

Since the company has successfully reduced net debt below its $35-billion target, it is planning to launch share buybacks worth $500 million in the June quarter.

For 2021, the company reaffirmed its projection for capital spending at around $13 billion. Notably, the integrated energy firm projected 2021 payments associated to the Gulf of Mexico oil spill incident at $1 billion post tax.

Zacks Rank & Stocks to Consider

BP currently has a Zacks Rank #3 (Hold). Some better-ranked players in the energy space include EOG Resources, Inc. EOG, Diamondback Energy, Inc. FANG and Matador Resources Company MTDR. While Matador carries a Zacks Rank #2 (Buy), EOG Resources and Diamondback sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

EOG Resources is likely to see earnings growth of 272.6% in 2021.

Diamondback is expected to witness earnings growth of 112.5% in 2021.

Matador is likely to see earnings growth of 300% in 2021.

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