BP Higher Revenue, Targets $5 Billion Divestment as Deepwater Drains

British oil giant $BP reported its second quarter earnings Tuesday, the last of the oil majors to report. BP is benefiting from cost cutting but still feeling the effect of the Deepwater Horizon disaster.

British oil giant $BP reported its second quarter earnings Tuesday, the last of the oil majors to report. Exxon Mobil Corp., Conoco Phillips,  Royal Dutch Shell PLC and Chevron reported last week. Like them BP returned to profit and also beat revenue expectations. BP is benefiting from cost cutting but still feeling the effect of the Deepwater Horizon disaster with more than $4 billion in payments this quarter.

Earnings: Profit was $144 million, compared with a loss of $1,419 million for the same period in 2016. The second-quarter replacement cost (RC) profit was $553 million, compared with a loss of $2,247 million for the same period in 2016. Revenue $57.37 billion versus $50.62 billion expected by Thomson Reuters analysts’ consensus.

Reaction: BP plc (ADR) NYSE: BP Aug 2 Close USD36.40 +0.13 (+0.36%)

Highlights

Second-quarter Upstream production was 10% higher than in the same period in 2016; first-half production was 6% higher.

Upstream major projects on track; two new projects sanctioned in quarter; significant gas discoveries in Senegal and Trinidad announced; $753 million exploration write-off, predominantly in Angola.

Downstream, first-half fuels marketing earnings around 20% higher than in the first half of 2016.

Brian Gilvary – Chief financial officer on Cash Flow and Deepwater Payouts

“Cash flow was strong in the first half – organic cash flow* exceeded organic capital expenditure* and dividends paid. While net debt* rose primarily due to Gulf of Mexico payments, we expect this will improve over the second half as these payments decline and divestment proceeds come in towards the end of the year.”“high point for the year” and “will taper down from here” to about $1 billion a year. The company reached a $20 billion settlement in 2015 with federal and state authorities that must be paid out over almost two decades.

BP is targeting a break-even oil price of $35 a barrel to $40 a barrel, a sign of how pessimistic big oil companies have become about the oil market’s future.

P’s exploration-and-production unit was buoyed by a raft of discoveries and new projects in Senegal, Egypt, the U.K. North Sea, Trinidad and Tobago, and India. The company is turning to new projects and acquisitions to try to generate growth again, hoping to boost production by a third in the next three years.

Outlook Bob Dudley – Group chief executive:

“We continue to position BP for the new oil price environment, with a continued tight focus on costs, efficiency and discipline in capital spending. We delivered strong operational performance in the first half of 2017 and have considerable strategic momentum coming into the rest of the year and 2018, with rising production from our new Upstream projects and marketing growth in the Downstream”

BP 2017 Divestment Program Between $4.5 Billion and $5.0 Billion

BP reported that the Company expects to achieve $4.5 billion and $5 billion in proceeds from divestments in 2017. Since the start of the year, the Company has garnered divestment proceeds of only $0.7 billion.

Consequently, BP will focus on heavy divestment activity in the in the back half of 2017.

Source: BP, Criterion

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