British energy giant
) reported third quarter 2013 adjusted earnings of $1.17 per
American Depositary Share (ADS) on a replacement cost basis,
excluding non-operating items. The results surpassed the Zacks
Consensus Estimate of 97 cents owing to a rise in oil prices and
a high underlying effective tax rate. However, the quarterly
figure decreased almost 25.9% from the year-earlier adjusted
profit level of $1.58.
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BP's total revenue increased 5% to $96.6 billion in the quarter
from the year-ago level of approximately $92.0 billion.
Production and Price Realization
Total production of 2.207 MMBoe/d (million barrels of oil
equivalent per day) was down 2.3% year over year, mainly on
account of divestments and higher exploration write-offs.
The company sold oil for $100.66 per barrel in the third quarter
(versus $99.00 in the year-earlier quarter) and natural gas for
$5.01 per thousand cubic feet (versus $4.77 in the year-earlier
quarter). Overall price realization rose 3.5% to $62.80 per Boe
from the year-ago level of $60.68 per Boe.
Owing to higher liquid and gas realizations, the Upstream segment
experienced a 1.3% year-over-year increase in adjusted underlying
The Downstream segment posted a profit of $720 million in the
quarter, down from the year-ago profit level of $3.0 billion. The
result was impacted by weaker refining margins (particularly in
the U.S.) as well as the absence of earnings from the divested
Texas City and Carson refineries.
Refining Marker Margin decreased to $13.6 per barrel from $22.6
in the third quarter of 2012. Total refinery throughput decreased
to 1,702 thousand barrels per day (MB/d) from 2,512 MB/d in the
year-earlier quarter. Refining availability saw a rise to 95.3%
from 95.0% in the year-earlier quarter.
The Rosneft segment includes equity-accounted earnings from
associates, representing BP's stake in the former. The segment
posted profit of $808.0 million in the reported quarter. The
performance was aided by the positive impact of foreign currency
exchange, a favorable duty lag effect and higher oil prices.
Capital Expenditure and Asset Sale
In the reported quarter, BP's total capital expenditure was $5.9
billion, all of which was organic. Disposal proceeds received in
cash were $0.4 billion.
BP's net debt was $20.1 billion at the end of the third quarter
compared with almost $31.3 billion a year ago. Net
debt-to-capitalization ratio was 13.3% compared with 20.9% in the
third quarter of 2012.
Net cash provided by operating activities was close to $6.3
billion versus $6.2 billion in the year-ago quarter.
Even though the company remained active in strategic development
during the third quarter, it expects flattish production in the
upcoming quarter due to planned major turnaround activity and
repairs in the high-margin North Sea, planned maintenance in
Alaska as well as the continued impact of divestment. For the
next quarter, the company expects refining margins to remain
under significant pressure due to very high gasoline stocks and
new competitor capacity addition as well as lower seasonal
BP is busy reshaping its portfolio through the divestment of
smaller non-core properties to pay spill-related costs, while
holding onto potential big resources such as Skarv. Hence,
refocused upstream activities and a leading position in the Gulf
region will definitely help BP in overcoming its near-term
However, BP projected a lower production level for the year
versus 2012. Although BP's strategy of offloading non-core
upstream properties will prove beneficial over time, its
far-reaching turnaround and maintenance ventures in the near term
are adding to its worries. The oil major expects to divest a
further $10 billion of assets before the end of 2015.
BP - U.K.'s third largest oil company by market value after
Royal Dutch Shell plc
) - is supported by a Zacks Rank #3, which is equivalent to a
Hold rating for a period of one to three months. However, there
are other stocks in the oil and gas sector -
Clayton Williams Energy, Inc.
TransAtlantic Petroleum Ltd.
) - which hold a Zacks Rank #1 (Strong Buy) and are expected to