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BP’s Q3 Segmental Review: Upstream Earnings Surge

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BP’s third-quarter segmental review: Upstream

Volatile oil prices have altered BP’s (BP) segmental dynamics. BP’s upstream segment, which posted URC (underlying replacement cost) EBIT (earnings before interest and tax) of -$0.2 billion in 3Q16, rose to $1.6 billion in 3Q17. This rise was due to higher crude oil and natural gas realizations, coupled with higher production. Average hydrocarbon realizations rose from $29 per barrel of oil equivalent in 3Q16 to $33 per barrel of oil equivalent in 3Q17.

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BP’s downstream segment earnings rose

BP’s downstream URC EBIT rose 63% YoY to $2.4 billion in 3Q17 due to better margins, partly offset by a marginal decline in refinery throughputs. BP’s average refining marker margin rose from $11.6 per barrel in 3Q16 to $16.3 per barrel in 3Q17. BP’s utilization rates fell slightly from 95.4% in 3Q16 to 95.3% in 3Q17.

BP’s Rosneft earnings rose on a URC EBIT basis. This segment encompasses equity earnings from Rosneft, which is a giant oil company in Russia. BP owns a 19.8% stake in Rosneft. Rosneft’s URC EBIT rose from $120 million in 3Q16 to $137 million in 3Q17.

Overall, URC EBIT rose from $1.0 billion in 3Q16 to $3.5 billion in 3Q17. BP’s upstream segment, which hindered overall URC EBIT in 3Q16, contributed 45% in 3Q17.

BP’s peers’ segmental trends

BP’s peers ExxonMobil (XOM) and Chevron (CVX) have also seen their contribution from segmental earnings change in 3Q17. ExxonMobil’s upstream earnings rose to $1.6 billion in 3Q17 from $0.6 billion in 3Q16. Chevron’s upstream segment earnings rose from $454 million in 3Q16 to $489 million in 3Q17. Royal Dutch Shell (RDS.A) is also likely to see a rise in their upstream earnings due to an increase in crude oil prices in 3Q17 over 3Q16.

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