British energy giant,
) reported first-quarter 2013 adjusted earnings of $1.32 per
American Depositary Share (ADS) on a replacement cost basis,
excluding non-operating items. The results comfortably beat our
expectation of $1.05, thanks to improved downstream operation.
However, the quarterly figure decreased almost 10.2% from the
year-earlier adjusted profit level of $1.47 due to weak oil
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BP's total revenue decreased 0.8% to $94.1 billion in the quarter
from the year-ago level of $94.9 billion.
Production and Price Realization
Total production of 2.330 MMBoe/d (million barrels of oil
equivalent per day) was down 5% year over year, mainly on account
of natural field decline across the portfolio.
The company sold oil for $103.11 per barrel in the first quarter
(versus $108.13 in the year-earlier quarter) and natural gas for
$5.52 per thousand cubic feet (versus $4.68 in the year-earlier
quarter). Overall price realization rose 1.7% to $65.11 per Boe
from the year-ago level of $64.02 per Boe.
Owing to depressed liquid realizations, higher cost and lower
volume, the Upstream segment experienced a 20.3% year-over-year
decrease in adjusted underlying profit.
The Downstream segment posted a profit of $1.6 billion in the
quarter, up from the year-ago profit level of $0.9 billion. The
result reflects the impact of robust performance in the fuels
business along with an encouraging refining environment.
Refining Marker Margin increased to $17.4 per barrel from $14.6
in the first quarter of 2012. Total refinery throughput decreased
to 2,065 thousand barrels per day (MB/d) from 2,270 MB/d in the
year-earlier quarter. Refining availability saw a marginal drop
to 95.1% from 94.9% in the year-earlier quarter.
BP completed the sale of its interest in TNK-BP to Russian
integrated oil major, Rosneft on Mar 21, for a total
consideration of $27.5 billion in cash and Rosneft shares. The
gain on the disposal was $15.5 billion, of which $12.5 billion
was recognised in the first quarter.
Capital Expenditure (Capex) and Asset Sale
In the reported quarter, BP's total capex was $17.7 billion.
About $5.7 billion of the total capex was organic.
BP's net debt was $17.7 billion at the end of the first quarter
compared with almost $31.0 billion a year ago. Net
debt-to-capitalization ratio was 11.9% compared with 20.6% in the
first quarter of 2012.
Net cash provided by operating activities was close to $4.0
billion versus $3.4 billion in the year-ago quarter.
Even though the company remained active in its strategic
development during the first quarter, it expects lower production
in the upcoming quarter due to normal seasonal turnaround
activity, particularly high-margin production in the Gulf of
Mexico and the North Sea, as well as higher costs. For the next
quarter, the company expects refining margins to be subdued.
For 2013, the company expects refining margins to experience a
downfall from the 2012 level due to turnaround activity. The
company's petrochemicals' margins are also expected to remain
weak during 2013.
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 finalized in the
reported quarter, 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 2013. Although BP's strategy of offloading non-core
upstream properties will prove beneficial over time, its
far-reaching turnaround and maintenance ventures will continue in
the upcoming quarter, further adding to its woes.
UK's second largest oil company by market value after
Royal Dutch Shell plc
), is supported by a Zacks Rank #3 (Hold).
Among the other integrated super majors,
) beat its Zacks Consensus Estimate, but
) came out with weaker-than-expected first-quarter 2013 earnings.