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BP earnings on stock.com


Feb 3 2015, 10.15am GMT


Though BP report 20% profit losses in Q4 2014 and 10% loss over the year, it beats expectations.

BP reported underlying replacement cost profit at $2.2 billion versus expectations of $1.5 billion and maintained a quarterly dividend of 10 cents per ordinary share.

In a similar story to ExxonMobil on Monday, BP has also beat expectations on fourth-quarter earnings, though results in both companies are down from the previous year.

BP saw an upward gap of 20 points at market opening, though the overall share price is down 16% since summer 2014.

Investors’ initial response at market opening was positive due to the cut backs promised in what BP describe as a company ‘reset’, including:

  • Plans to cut capital expenditure by $4bn-$6bn this year - total organic capital expenditure in 2014 was $22.9 billion, lower than initial guidance of $24-25 billion.
  • Spending cuts on exploration because of the fall in oil prices.

“We have now entered a new and challenging phase of low oil prices through the near and medium term,” said Bob Dudley, BP group chief executive. “Our focus must now be on resetting BP: managing and rebalancing our capital programme and cost base for the new reality of lower prices while always maintaining safe, reliable and efficient operations.”

In 2015, BP plans to reduce exploration expenditure and postpone marginal projects in the Upstream, and not advance selected projects in the Downstream and other areas. As a result, organic capital expenditure in 2015 is expected to total around $20 billion, significantly lower than previous guidance of $24-26 billion.

Overall Group oil and gas production, including Russia, was 3.2 million barrels of oil equivalent a day. Excluding Russia, underlying Upstream production was 2.3% higher than a year earlier, but reported production of 2.2 million barrels a day was 2.6% lower than 4Q 2013, primarily due to the expiry of the Abu Dhabi concession in January 2014.

Estimated underlying net income from the 20% BP share in Russian oil giant Rosneft was $470 million compared with $1.1 billion in 4Q 2013 due to sanctions and the weak ruble. This is seen however, as a surprise profit from Rosneft and a positive aspect to the earnings report.

After taking account of a $3.6bn write-off of assets BP reported a loss for the quarter of $969m. Profits also fell due to the $477m cost in the final quarter for legal and clean up costs relating to the Gulf of Mexico oil spill in 2010. The total cost of the spill now stands at $43.5bn.

The price of oil, down over 50% in 6 months, has affected BP hugely as the company based its reports on an average oil price between October and December last year of $77 a barrel, compared with $109 a year earlier. For 2015, the average price has been $48 and analysts have predicted that it remains below $80 a barrel for at least two years.

The UK100 [FTSE] rose 54.82 points, or 0.8% at 6,837.37 points by 8.22am GMT on the back of traders’ reaction to BP earnings.

MT4 chart: BP

BP on stock.com

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