Watch Out For BP’s 3Q’17 Earnings As It Moves Closer To Its Midstream IPO

by Trefis Team
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BP Plc. (NYSE:BP), the European integrated energy company, is set to post its financial numbers for the September quarter 2017 on 31st October 2017((BP To Announce September Quarter 2017 Results, www.bp.com)). The market expects the company’s top-line to suffer due to the negative impact of Hurricane Harvey and Nate on its production volumes during the quarter. However, the analysts anticipate a strong improvement in the company’s earnings both sequentially as well as annually backed by its cost reduction initiatives. Further, the investors are eagerly waiting to know about the company’s progress in spinning off its midstream business and the subsequent IPO, which is likely to take place in the fourth quarter of this year.  We have a $40 price estimate for BP’s stock, which is in line with the current market price.

See Our Complete Analysis For BP Plc. Here

Key Trends Witnessed In 3Q’17

  • Commodity prices have continued to be volatile in the last three months due to the impact of various hurricanes and storms along the US coastline. Yet, the WTI crude oil prices remained flat and averaged $48.18 per barrel for the September quarter. With no significant improvement in commodity prices, BP’s upstream 3Q’17 revenues are highly dependent on its production volumes.
  • Due to the heavy rains and floods caused by the Hurricane Nate in the later half of September, BP had to shut down offshore operations in the Gulf of Mexico for a few days. Though the company resumed its operations quickly, this could impact its output for the quarter.

  • BP has been in the news lately because of its plans to spin-off its midstream operations into a new master limited partnership called BP Midstream Partners LP (BPMP). The company has commenced the initial public offering (IPO) of the common units of BPMP that will enable it to raise additional funds to efficiently manage its pipeline operations. The partnership structure will not only allow BP to retain operational control and partial ownership of its pipeline assets, but will also generate a higher value for its shareholders because of the tax free distributions being passed-on to the company.
  • In addition to the three project start-ups announced earlier this year, BP confirmed commencement of production from three more projects start-ups during the third quarter. These start-ups include Juniper in Trinidad, Persephone in Australia, and the first phase of the Khazzan tight gas development in Oman. These projects are part of the seven major project start-ups that are expected to contribute an incremental production capacity of 800,000 barrels of oil equivalent per day (boed) to the company’s portfolio by the end of this decade.
  • Further, in line with its strategy to expand its LNG operations, BP is purchasing six new state-of-art LNG tankers worth $1 billion being financed by KMarin and ICBC Leasing. The tankers, that will be added to the company shipping fleet in 2018-2019, will help service a 20-year liquefaction contract with the Freeport LNG facility in Texas, and other international LNG projects in BP’s global portfolio.

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