Higher Average Oil & Gas Prices To Drive BP’s Earnings In The Fourth Quarter

by Trefis Team
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BP Plc. (NYSE:BP) British Petroleum is expected to report earnings on the 5th of February. The oil major has witnessed  turbulent times during the quarter with the price of WTI oil falling from $75 a barrel early in the fourth quarter to $45 toward the end of the quarter. Despite this fall, the average price per barrel is expected to be higher than the same quarter in 2017. With the fall in oil prices, we expect upstream activities to be affected and as a result, BP upstream earnings may not come in as robust as previously seen in the third quarter. Natural Gas prices did see an increase in this quarter, to average around $4.00, and this should help offset the decline in the price of oil. Downstream margins are expected to fall as refining margins fell from $14.70 to $11 in the quarter.

We currently have a price estimate of $46 per share for BP, which is higher than its market price. View our interactive dashboard – BP Pre-Earnings  – and modify the key drivers to visualize the impact on the company’s valuation.

Key Takeaways for the 4th Quarter Pre-Earnings:

*Revenues are expected to come in at $39 billion for the quarter, up from $32 billion a year ago.

*Fourth quarter earnings are expected to come in at $.78 cents this represents a 21.9% increase YOY.

*Net income is expected to come in 25% higher at $2.63 billion

*With 30% ownership in the joint venture Aker BP found 158 million barrels of oil in the quarter.

*The company has made a number of investments in renewable energy with investments in companies like PowerShare, an eMobility company focused on EV recharging.

*BP reached a deal with Lotte in South Korea to double its petrochemicals business through 2019.

*After discovering substantial potential oil deposits in the Gulf of Mexico BP plans to expand its output in the region by 100,000 BOE/D.

Overall BP has continued to strengthen its operations for the quarter by reducing inefficient operations and increasing oil production volumes for the quarter. Going into the next quarter additional volumes from the Eagleford Shale will help BP take its U.S volumes up from 325,000 BOE/d to 505,000 BOE/d. We believe as oil prices steady into 2019, that the company will continue to see improved results. Continued improvement will help the stock.

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