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BP Tops Q3 Earnings Estimates, Expects Continued Oil Recovery

BP plc BP reported third-quarter 2020 adjusted earnings of 3 cents per American Depositary Share (ADS) on a replacement cost basis, excluding non-operating items. The bottom line compared favorably with the Zacks Consensus Estimate of a loss of 9 cents per ADS but decreased from the year-ago quarter earnings of 66 cents.

Total revenues of $44,202 million declined from $69,292 million in the year-ago quarter and missed the Zacks Consensus Estimate of $60,017 million.

The earnings beat was owing to recovering fuel demand and commodity prices in the September quarter since strict social-distancing measures, to combat the coronavirus, were eased across the world. However, lower refinery throughput and a decline in oil equivalent production volumes partially offset the positive.

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

No Share Repurchases

BP did not carry out the share repurchase program in the third quarter. In the first quarter, it bought back 120 million ordinary shares for $776 million.

Dividend

The company, which cut its dividend in half in August, announced a quarterly dividend of 31.5 cents per ADS, which will be paid on Dec 18.

BP’s Operational Performance

Upstream:

For the third quarter, total production of 2,243thousand barrels of oil equivalent per day (MBoe/d) declined from 2,568MBoe/d in the year-ago quarter. Production was curtailed by hurricanes in the U.S. Gulf of Mexico and lower capital investments.

BP sold liquids at $38.17 a barrel in the third quarter compared with $55.68 in the prior-year period. Moreover, it sold natural gas at $2.56 per thousand cubic feet compared with $3.11 in the year-ago quarter. Overall price realization fell to $26.42 per Boe from the year-ago level of $35.48.

After adjusting for non-operating items and fair value accounting effects, underlying replacement cost earnings before interest and tax for the segment amounted to $878 million. The figure deteriorated from $2,139 million in the year-ago quarter. Although the September quarter witnessed recovering fuel demand and improving commodity prices, a year-over-year drop in realized prices from oil equivalent barrels of liquids and production volumes primarily caused the downside.

Downstream:

Segmental profits plunged to $636 million from $1,883 million in the year-ago quarter, primarily due to lower refinery throughput.

Refining marker margin of $6.2 per barrel for the third quarter was lower than the year-earlier quarter’s $14.7. Moreover, total refinery throughput decreased to 1,587 thousand barrels a day (MBbls/d) from 1,813 MBbls/d in the prior-year quarter. The company’s refinery throughputs in both the United States and Europe declined.

Total sales volumes of refined products fell to 4,972 MBbls/d from 5,945 MBbls/d in the year-ago period. Refining availability rose marginally to 96.2% for the quarter from the year-ago level of 96.1%.

Rosneft:

Loss from the segment amounted to $177 million against the year-ago adjusted profit of $802 million. The decline was primarily caused by the decline in oil prices.

Oil Spill Costs & Capex

Through the September quarter, the integrated energy firm made a payment of $0.1 billion — after tax — associated with the oil spill incident in the Gulf of Mexico. Notably, organic capital expenditure for the quarter was recorded at $2.5 billion.

Financials

BP's net debt — including leases — was $49,620 million at third quarter-end, lower than $55,936 million in the prior-year quarter. Gearing was recorded at 33% compared with 31.7% in the prior-year quarter.

Outlook

Despite the challenging business scenario owing to the pandemic, the integrated major expects the recovery in crude oil demand, which started in spring, to continue. The optimistic view was supported by rising fuel demand in Asia, added BP.

However, the company’s view on the refining business is not encouraging. The British energy major issued a challenging outlook for refining margin since demand recovery for gasoline and jet fuel has leveled off and the inventory levels have increased.

Zacks Rank & Stock to Consider

The company currently has a Zacks Rank #4 (Sell). Meanwhile, a few better-ranked players in the energy space include Equinor ASA EQNR, Sunoco LP SUN and Summit Midstream Partners, LP SMLP. While Sunoco sports a Zacks Rank #1 (Strong Buy), Equinor and Summit Midstream carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Equinor has seen upward earnings estimate revisions for 2020 in the past 30 days.

Sunoco has seen upward estimate revisions for its 2020 bottom line in the past 30 days.

Summit Midstream has seen upward estimate revisions for its 2021 bottom line in the past 30 days.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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