BP Profits From Rising Crude Oil Prices, Flat Production

BP PLC (NYSE: BP) reported second-quarter 2019 results before markets opened Tuesday. The oil and gas supermajor posted adjusted diluted earnings per American depositary share (ADS) of $0.83 on sales and operating revenues of $72.68 billion. In the same period a year ago, the company reported earnings per ADS of $0.85 on revenues of $75.44 billion. Analysts had estimated earnings per ADS of $0.79 and revenues of $71.5 billion. One ADS is equal to six ordinary shares.

Replacement cost (RC) profit (in effect net income) was essentially flat at $1.775 billion compared to $1.789 billion in the year-ago quarter. Underlying RC profit (adjusted net income) totaled $2.81 billion in the quarter, again essentially flat with $2.82 billion a year ago.

Excluding payments for the 2010 Gulf of Mexico spill, operating cash flow rose from $7 billion in the second quarter of 2018 to $8.2 billion. The total includes $1.5 billion released to working capital in the second quarter. BP paid an after-tax total of $1.4 billion in the quarter primarily in scheduled payments for the Gulf of Mexico spill.

CEO Bob Dudley said:

At the midpoint of our five-year plan, BP is right on target. Reliable performance and disciplined growth across our businesses are delivering strong earnings, cash flow and returns to shareholders. And this is also allowing us to grow businesses that can make a significant contribution in the energy transition, helping deliver the energy the world needs with lower carbon.

BP’s price realizations for liquids fell from $67.24 a barrel in the second quarter of 2018 to $62.63 a barrel. Sequentially, realized prices on liquids rose by more than $6 a barrel. Natural gas averaged $3.65 per thousand cubic feet in the year-ago quarter, compared to $3.35 in the second quarter of this year. Liquids production of 1.3 million barrels a day was flat sequentially and up by 84,000 barrels year over year. Third-quarter production is forecast to be lower sequentially due to seasonal maintenance and turnarounds along with the effects of Hurricane Barry.

Downstream (refining) pretax profits increased by about 53% year over year to $1.29 billion. On an adjusted basis, refining profits decreased from $1.46 billion a year ago to $1.37 billion. BP’s refining marker margin was $15.20 a barrel, compared with $14.90 in the year-ago quarter and $10.20 in the first quarter of this year. The outlook for the current quarter calls for a lower level of turnaround activity and lower industry refining margins.

At the end of last year, BP reported that it had paid out almost $67 billion in pretax charges related to the disaster that claimed the lives of 11 workers and dumped millions of barrels of crude oil into the Gulf of Mexico in April 2010. In 2018, the company paid out a total of $3.2 billion and said it expects to pay an additional $1.9 billion in the current fiscal year.

BP’s organic capital spending totaled $3.7 billion in the second quarter. For the year to date, capital expenditures totaled $7.3 billion, up from $3.5 billion and $7.0 billion in the comparable periods a year ago.

BP’s ADSs closed up about 0.3% on Monday, at $39.09 in a 52-week range of $36.28 to $47.16. They traded up about 1.4% in Tuesday’s premarket session at $39.65. The 12-month consensus price target was $49.83 before Tuesday’s report.