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Where Does BP Stand after Its 2Q15 Earnings?

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BP’s 2Q15 revenues

BP (BP) released its 2Q15 financial results on July 28. We’ll discuss its latest quarterly results in this series. First up for discussion is where does BP stand after its 2Q15 earnings and revenues? The company recorded $60.64 billion in sales and other operating revenues in 2Q15, down 35.5% from the $93.95 billion recorded in 2Q14. BP’s revenues for the latest quarter decreased due to lower upstream and downstream revenues. The company’s revenues decreased throughout its US and non-US operations.

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Replacement cost (or RC) profit, pre-tax, decreased significantly to a loss of $6.26 billion in 2Q15 from positive RC profit of $3.18 billion in 2Q14. RC profit excludes inventory holding gains and losses from operating profit. RC profit, a measure of non-operating income, is disclosed under international financial reporting standards (or IFRS).

BP’s earnings in 2Q15 versus 2Q14 and 1Q15

BP recorded a $5.82 billion net loss in 2Q15 versus $3.37 billion in net income in 2Q14. Its net income margin slumped to -9.6% in 2Q15 from 3.6% a year earlier. Net income margin is net income attributable to BP shareholders divided by total revenues for the quarter. Geography-wise, RC profit decreased mostly in the company’s North American operations from 2Q14 to 2Q15. Segment-wise, BP’s downstream segment bucked the trend by improving its operating profit, measured as RC profit.

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Oil spill and restructuring charges

In 2Q15, BP recorded a $9.8 billion pre-tax charge related to the 2010 Deepwater Horizon oil spill. The charge followed a July 2 agreement to settle all outstanding federal and state claims with the United States and five state government bodies. This charge was mainly to blame for the $6.3 billion RC loss.

Plus, BP recorded a $272 million restructuring charge in 2Q15. No such charges were recorded in 2Q14.

ExxonMobil recorded 24.6% decline in 2Q15 adjusted revenues over 2Q14. Total (TOT) recorded a 30% decline in adjusted revenues in 2Q15 over 2Q14, while Statoil ASA’s (STO) recorded a 13% decline in the same period. BP’s integrated energy peer ExxonMobil (XOM) is 1.72% of the SPDR S&P 500 ETF (SPY) and 15.7% of the Energy Select Sector SPDR (XLE).

Next in this series, we’ll discuss BP’s earnings versus estimates.

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