Inside BP’s Segmental Earnings Trend in 2Q17
BP’s segmental earnings
Volatile oil prices have shifted BP’s (BP) segmental dynamics. BP’s Upstream segment, which reported URC (underlying replacement cost) EBIT (earnings before interest and tax) of $29 million in 2Q16, rose to $710 million in 2Q17 due to higher crude oil and natural gas prices and greater production. Brent prices rose from an average of $46 per barrel in 2Q16 to $50 per barrel in 2Q17.
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BP’s Downstream segment earnings
BP’s Downstream URC EBIT fell 7% YoY to $1.4 billion in 2Q17 due to weaker throughput due to turnaround activities. BP’s average refining marker margin stayed steady at $13.8 per barrel in 2Q17, compared with 2Q16. BP’s refinery utilization rate fell to 94.5% in 2Q17 from 95.7% in 2Q16.
BP’s Rosneft segment’s earnings improved on a URC EBIT basis. This segment has equity earnings from Russia’s largest oil company, Rosneft, and BP holds a 19.8% stake in Rosneft. The segment’s offering to BP’s total URC EBIT rose to $279 million in 2Q17, up from $246 million in 2Q16.
Overall, URC EBIT rose from ~$1.3 billion in 2Q16 to ~$2.2 billion in 2Q17. The Upstream segment, which contributed just 2% to BP’s URC EBIT in 2Q16, contributed 33% in 2Q17.
Peer segmental trends
Peers ExxonMobil (XOM), Royal Dutch Shell (RDS.A), and Chevron (CVX) also saw their contributions from segmental earnings change in 2Q17. ExxonMobil’s upstream earnings increased to ~$1.2 billion in 2Q17 from $294 million in 2Q16.
CVX’s upstream segment, which posted a loss in 2Q16, saw its earnings rise to $853 million in 2Q17. Shell’s (RDS.A) upstream segment earnings, which plunged to -$1.3 billion in 2Q16, switched to a profit of about $339 million in 2Q17 on an adjusted basis.