BP’s upstream earnings
In the previous part, we looked at BP’s (BP) major upstream projects, several of which would add to BP’s hydrocarbon production in 3Q17. In this article, we’ll see how BP’s Upstream earnings could shape up in the near term. BP’s Upstream earnings are dependent on crude oil prices and hydrocarbon volumes.
Crude oil price trends in 3Q17
Oil prices have a significant influence on BP’s Upstream earnings. An increase of $1 per barrel in Brent prices would increase BP’s pretax replacement cost operating profit by $340 million annually.
In 3Q17, Brent prices have risen quarter-over-quarter and year-over-year. Brent prices have surged to an average of $51 per barrel in 3Q17 quarter-to-date, which is higher than its average of $50 per barrel in 2Q17. Brent prices in 3Q17 are significantly higher compared to the average of $46 per barrel seen in 3Q16.
BP expects its hydrocarbon production to stay stable in 3Q17 over 2Q17. Seasonal turnaround and maintenance activities are likely to offset the volumes added by new field startups and existing field rampups.
BP produced 2.4 MMboepd (million barrels of oil equivalent per day) in 2Q17. Comparatively, Chevron (CVX) produced 2.7 MMboepd in 3Q17. However, ExxonMobil (XOM) and Royal Dutch Shell (RDS.A) produced higher volumes standing at 3.9 MMboepd and 3.5 MMboepd, respectively, in 3Q17.
BP’s 3Q17 production should also stand closer to the previous quarter’s production of 2.4 MMboepd. However, BP produced 2.1 MMboepd in 3Q16. So, BP’s production is expected to rise in 3Q17 over 3Q16.
Earnings from BP’s Upstream segment could rise year-over-year in 3Q17 because hydrocarbon production is expected to rise. Also, crude oil realizations are likely to be higher in 3Q17 over 3Q16. However, quarter-over-quarter, BP’s Upstream earnings are likely to stay almost stable due to steady production and a marginal rise in crude oil realizations.