British energy giant,
) reported second quarter 2013 adjusted earnings of 86 cents per
American Depositary Share (ADS) on a replacement cost basis,
excluding non-operating items. The results came below the Zacks
Consensus Estimate of $1.09 owing to a drop in oil prices and a
high underlying effective tax rate. Also, the quarterly figure
decreased almost 23.2% from the year-earlier adjusted profit
level of $1.12.
BP's total revenue decreased 0.3% to $94.7 billion in the quarter
from the year-ago level of approximately $95.0 billion.
Production and Price Realization
Total production of 2.241 MMBoe/d (million barrels of oil
equivalent per day) was down 1.5% year over year, mainly on
account of natural field decline across the portfolio.
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The company sold oil for $94.92 per barrel in the second quarter
(versus $100.89 in the year-earlier quarter) and natural gas for
$5.37 per thousand cubic feet (versus $4.54 in the year-earlier
quarter). Overall price realization rose 1.8% to $61.27 per Boe
from the year-ago level of $60.17 per Boe.
Owing to depressed liquid realizations, higher cost and lower
volume, the Upstream segment experienced a 2.6% year-over-year
decrease in adjusted underlying profit.
The Downstream segment posted a profit of $1.2 billion in the
quarter, up from the year-ago profit level of $1.1 billion. The
result reflects the impact of robust performance by the fuels
business along with an encouraging refining environment.
Refining Marker Margin increased to $19.1 per barrel from $18.9
in the second quarter of 2012. Total refinery throughput
decreased to 1,708 thousand barrels per day (MB/d) from 2,282
MB/d in the year-earlier quarter. Refining availability saw a
rise to 95.3% from 94.5% in the year-earlier quarter.
The Rosneft segment includes equity-accounted earnings from
associates, representing BP's 19.8% share in the former. The
segment posted profit of $218.0 million in the reported quarter.
Performance was muted by exchange losses and falling oil prices.
Capital Expenditure (Capex) and Asset Sale
In the reported quarter, BP's total capex was $5.8 billion, all
of which was organic. Disposal proceeds received in cash were
BP's net debt was $18.2 billion at the end of the second quarter
compared with almost $31.5 billion a year ago. Net
debt-to-capitalization ratio was 12.3% compared with 21.7% in the
second quarter of 2012.
Net cash provided by operating activities was close to $5.2
billion versus $6.1 billion in the year-ago quarter.
Even though the company remained active in its strategic
development during the second quarter, it expects lower
production in the upcoming quarter due to planned major
turnaround activity and repairs in the high-margin North Sea,
planned maintenance in Alaska and the continued impact of
divestment. For the next quarter, the company expects refining
margins to be subdued.
BP remains busy in reshaping its portfolio through the divestment
of smaller non-core properties to pay spill-related costs, while
holding on to potential big resources, like Skarv. Hence,
refocused upstream activities and a leading position in the Gulf
region will definitely help BP in overcoming its near-term
With the sale of its 50% interest in TNK-BP was finalized in the
first half of 2013, BP has made its future position in Russian
activities quite clear. BP has sold its interest to
state-controlled rival Rosneft for $16.7 billion cash and a
12.84% stake in Rosneft. Subsequently, BP used $4.9 billion of
the cash consideration to acquire another 5.66% of Rosneft shares
from Rosneftegaz. As a result, BP overall now holds a 19.75%
stake in Rosneft.
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 woes.
U.K.'s second 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 -
Rose Rock Midstream, L.P.
VOC Energy Trust
) - which hold a Zacks Rank #1 (Strong Buy) and are expected to