Morningstar | BP Hits Its Marks in 1Q; FVE Unchanged
BP’s first-quarter earnings largely met expectations while key guidance items remain unchanged. As a result, our fair value estimate and moat rating are unchanged. Earnings fell to $2.4 billion from $2.6 billion a year ago. Upstream earnings fell to $2.9 billion from $3.2 billion last year on lower oil price realizations and turnaround activity in the Gulf of Mexico offset by strong gas marketing and trading. Production volumes increased 2% from last year, but underlying production (adjusted acquisitions and entitlement impacts) fell 1.9% due to the aforementioned turnarounds and severe weather impacts on the Lower 48 unconventional business, BPX. Growth should remain relatively weak in the second quarter as a result of ongoing seasonal maintenance. Long term, however, the contribution of BP's major projects in ramp-up phase and under construction should drive volumes higher, delivering a 5% compound annual growth rate through 2021.Downstream earnings fell to $1.7 billion from $1.8 billion last year. In the fuels business, weak refining results due largely to narrower crude differentials were offset by growth in fuels marketing earnings from continued expansion in new markets. Lubricants earnings fell but were largely offset by improved petrochemical results. Rosneft earnings increased to $567 million from $247 million last year as foreign-exchange effects were partially offset by lower oil prices.
Operating cash flow excluding Gulf of Mexico payments increased to $5.9 billion from $5.4 billion the year before. Share repurchases during the quarter were minimal, but BP reiterated its intention to repurchase shares issued as part of scrip dividend since the third quarter of 2017 by year-end, which would imply about $1.5 billion. Gearing also remains relatively high at 30.4%. However, cash flow generation should improve through the remainder of the year (higher oil prices, improved downstream results) while asset sales should accelerate as well.
As such, we expect BP to have ample funds to execute its repurchase plan and reduce leverage.
BP is an integrated oil and gas group based in the United Kingdom. Co. is engaged in the exploration and production of crude oil and natural gas; refining, marketing, supply and transportation; and the manufacture and marketing of petrochemicals. Co. operates globally, with business activities in Europe, the U.S., Canada, Russia, South America, Australasia, Asia and parts of Africa. Co. operates in two business segments: Exploration and Production - including oil and natural gas exploration and development and production; and Refining and Marketing- activities include the refining, manufacturing, supply and trading, marketing and transportation of crude oil, petroleum and petrochemicals.
Morningstar, Inc. is a leading provider of independent investment research in North America, Europe, Australia, and Asia. The company offer an extensive line of products and services for individual investors, financial advisors, asset managers, and retirement plan providers and sponsors.
Morningstar provides data on approximately 530,000 investment offerings, including stocks, mutual funds, and similar vehicles, along with real-time global market data on more than 18 million equities, indexes, futures, options, commodities, and precious metals, in addition to foreign exchange and Treasury markets. Morningstar also offers investment management services through its investment advisory subsidiaries and had approximately $185 billion in assets under advisement and management as of June 30, 2016.
We have operations in 27 countries.
Unfortunately, this report is not available for the investor type or country you selected.
Browse all ResearchPool reportsReport is subscription only.
Thank you, your report is ready.
Thank you, your report is ready.