BP Beat Earnings On Higher Oil Prices, Sees Lower Refining Margins

British Oil major BP PLC reported better than expected second quarter earnings Tuesday. $BP have been continuing it’s share buy back program. $BP reports ahead of fellow majors $XOM, $CVX and RDSA earnings, $COP  and $TOT reported last week.

British Oil major BP PLC reported better than expected second quarter earnings Tuesday. $BP have been continuing it’s share buy back program. $BP reports ahead of fellow majors $XOM, $CVX and RDSA earnings, $COP  and $TOT reported last week.

Bp Rig

BP PLC ADR (NYSE: $BP) Reported Earnings Before Open Tuesday

$1.15 Forecast $0.85 EPS on $80.8 Billion in Revenue


BP reported Q3 earnings Tuesday adjusted diluted earnings per ADR of $1.15 on revenues of $80.8 billion. In the same period a year ago, the company reported earnings per ADR of $0.74 on revenues of $60.81 billion. Analysts had estimated earnings per ADS of $0.85 and revenues of $79.86 billion. One ADS is equal to six ordinary shares.

BP’s adjusted replacement cost profit (adjusted net income/loss) was $3.09 billion, compared with $1.38 billion in the year-ago quarter. BP posted an unadjusted replacement cost profit of $3.35 billion, $0.93 per ADR, compared with a profit of $1.77 billion and a net profit per ADR of $0.42 in Q3017. The result were ahead of the consensus estimate of 85 cents per share.  Upstream benefited from higher oil and gas price realizations.

BP’s full-year consensus estimates were for earnings of $3.41 per share and revenue of $294.63 billion. This represents year-over-year changes of +81.38% and +20.46%, respectively.

Seasonal turnaround and maintenance activities limited its output levels In the downstream segment, the company expects high level of turnaround activities at its Whiting refinery in the United States. While turnaround activities may impact throughput levels, the improved refining margin environment  offset the adverse impacts to a considerable extent.


Market Reaction Pre-market 42.14 +1.11 (+2.71%)

CEO Bob Dudley said: Our focus on safe and reliable operations and delivering our strategy is driving strong earnings and growing cash flow. Operations are running well across BP and we’re bringing new, higher-margin barrels into production faster through efficient project execution. We have made very good progress with our acquisition from BHP and expect to complete the transaction tomorrow. This will transform our position in the US Lower 48 and we expect it to create significant value for BP. This progress all underpins our commitment to growing distributions for our shareholders.


  • BP’s price realizations for liquids rose from $47.45 a barrel in the third quarter of 2017 to $69.68.
  • Natural gas averaged $2.89 per thousand cubic feet in the year-ago quarter, compared to $3.86 in the third quarter this year.
  • Downstream (refining) pretax profits increased by about 3.4% year over year to $2.25 billion. On an adjusted basis, refining profits slipped from $2.34 billion a year ago to $2.11 billion.
  • BP’s refining marker margin was $14.70 a barrel, compared with $16.30 in the year-ago quarter and $14.90 in the second quarter of this year.
  • The outlook for the third quarter calls for lower industry refining margins. BP also expects a significantly higher level of turnaround activity in the second half of the year, particularly at its Whiting, Indiana, refinery.
  • To date, BP has paid out almost $67 billion in pretax charges related to the Deepwater disaster of April 2010.
  • In the third quarter, the company paid out a total of $470 million.
  • BP’s organic capital spending totaled $3.7 billion in the third quarter.
  • For the year to date, capex totals $10.7 billion, down from $11.9 billion in the first nine months of last year.

Pre Report Comments

Piper Jaffray analysts.

Piper Jaffray rated BP ‘overweight’ on Oct. 22 with a $52 price target,. Piper’s Jaffray believe a series of new projects through 2021 remain in line with projected production growth and could produce strong earnings.

  • “Adding 900mboe/d of new projects through 2021 that underpins the targeted 5% production CAGR from 2016 to 2021E” .
  • “production growth is toward upper-end of the peer group,” 

BP leads the industry in free cash flow yield and is likely to hold the advantage.

Goldman Sachs analysts

In August Goldman issued a note;

  • BP “is on the cusp of delivering one of the industry’s strongest pipelines of new oil & gas projects.”
  • “We estimate that BP’s portfolio of new projects is more profitable today and is now among the best in the industry.”

One potential headwind would be falling oil prices. Oil prices have risen in 2018  with the WTI Crude Oil index increasing 10.6% this year, and the Brent Crude Oil index rising about 15.3% on the year. 

BP PLC  Q2 Earnings Recap

$0.85 Matched $0.85 EPS and $76.907 billion in revenue 


Second-quarter 2018 adjusted earnings of 85 cents per ADS on a replacement cost basis, excluding non-operating items. The bottom line matched consensus  and improved from the year-ago quarter’s 21 cents. Total revenues were $76,907 million in the quarter, up from $57,366 million in the year-ago quarter. 


Market Reaction > Lunch $45.05 USD +0.65 (1.45%)

Q2 Highlights


  • Total production rose 2% year over year to 2.465 million barrels of oil equivalent per day (MMBoe/d).
  • Ramp-up in key developments primarily aided the rise.
  • BP sold liquids at $67.24 a barrel in the second quarter as compared with $46.27 in the year-earlier quarter.
  • BP sold natural gas at $3.65 per thousand cubic feet, compared with $3.19 a year ago.
  • Overall price realization increased to $43.37 per barrels of oil equivalent (Boe) from the year-ago level of $33.59.
  • After adjusting for non-operating items and fair value accounting effects, underlying replacement cost profit before interest and tax for the segment was $3,508 million, considerably higher than $710 million a year ago.
  • Increased realized prices from oil and natural gas and rising volumes primarily drove the upside.


  • Downstreaml profits improved to $1,455 million from $1,413 million in the year-ago quarter.
  • The Whiting refinery processed massive crude volumes that primarily attributed to the growth.
  • Refining marker margin of $14.9 per barrel in the second quarter of 2018 was higher than 13.8 in the year-ago quarter.
  • However, total refinery throughput fell to 1,680 thousand barrels a day (MB/d) from 1,688 MB/d in the year-earlier quarter.
  • Refining availability was 93.3%, compared with 94.5% in the year-ago quarter.
  • Downstream earnings fell 30% to $838 million, largely due to lower margins on refined product sales from its international refining operations.
  • Production edged up about 2% to 2.83 million boe per day.

Cap Ex

  • BP reported exploration costs of $164 million, this was down almost 81% from $850 million in the year-earlier quarter.


  • In the second-quarter 2018, BP spent $80 million on the repurchase of 11 million shares.
  • BP raised its quarterly dividend by 2.5% to 10.25 cents per ordinary share.


  • Recorded profits of $766 million, up from $279 million a year ago.

Deepwater Oil Spill Costs

  • Through the first half of 2018, BP made a payment of $2.4 billion, after tax, associated with the oil spill.
  • For 2018, BP projects total payment to be just over $3 billion.

Cash and Debt

  • BP’s net debt was $39,277 million at the end of the second quarter, nominally lower than $39,794 million a year ago.
  • Net debt ratio was 27.8%, slightly below 28.8% in the prior-year quarter.


  • For the July-to-September quarter of 2018, the company expects oil and natural gas production to be mostly flat sequentially.
  • Due to maintenance and turnaround activity which will hurt third-quarter 2018 refining margins.


BP Q1 Earnings Preview


$2.586 billion in net profit for Q1, the highest since 2014 and beating analysts’ estimates of $2.12 billion.


  • Reaction May 1, 9:56 AM EDT 44.91 ▲ 0.31 (0.70%)

Deepwater Liability Update

“We’ve reached the peak now for quarterly payments in terms of Macondo” and. The company’s debt will “come down as the year progresses, quarter on quarter, especially given where prices are today.”  CFO Gilvary said in a Bloomberg television interview on Tuesday

BP’s cash flow from operations in the first quarter, excluding payments related to the spill, was $5.4 billion. The company paid out $1.6 billion on a pretax basis related to Deepwater Horizon, including a final $1.2 billion payment to the U.S. Department of Justice.

Payments are expected to be just over $3 billion in 2018, weighted to the first half of the year.

BP’s gearing ratio of net debt to equity, was 28%, an increase from 27% in the fourth quarter of 2017, BP has worked through nearly all of the 390,000 legal claims stemming from the 2010 explosion, the bill for its remaining claims unexpectedly jumped late last year. BP was forced to take a surprise $1.7 billion charge to net income in the fourth quarter because the cases that did remain were among the largest and most complex.

Share Buyback

Spent $120 million buying 18 million shares in the first quarter

Other Oil Majors Q32017 Earnings Reports 

ExxonMobil $XOM Earnings Shrug Off Harvey With Robust Cashflow

Chevron $CVX Q3 Earnings Miss as U.S. Output Falls

ConocoPhillips $COP Earnings Beat But Lowers Capex

Live From The Pit 

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