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Have BP’s Cash Flows Improved in Q1?

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BP’s cash flow analysis

BP’s (BP) cash flow from operations rose by 45% YoY to $5.3 billion in Q1 2019. In this article, we’ll review whether these inflows could cover essential expenses like capex and dividends in the quarter.

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BP had a cash outflow of $5.5 billion in the form of capex and acquisitions and $1.4 billion in the form of dividends, adding up to $6.9 billion of cash outflow. Thus, BP’s cash flow from operations fell short by $1.6 billion ($5.3 billion of inflows minus $6.9 billion of outflows) in covering vital capex and dividend outflows.

Thus, BP covered the shortfall with the sale of non-core assets and utilization of its cash reserves. BP had $0.6 billion of divestments inflows in the year. Also, BP’s cash and equivalents fell from $22.5 billion at the beginning of the first quarter to $21.3 billion at the end of the quarter.

BP’s cash flow compared to peers

In Q1 2019, BP’s cash flow shortfall stood at 31% (represented as a percentage of its earnings capacity). Royal Dutch Shell (RDS.A) and Total (TOT) also saw shortfalls in Q1 2019. Shell’s cash flow from operations of $8.6 billion fell short in covering capex and dividends by 4%. Similarly, Total’s cash flow from operations of $3.6 billion fell short by 25% in the first quarter.

Cash flow analysis

BP saw a cash flow shortfall in Q1 2019, not a good sign. However, BP’s shortfall has declined from 49% in Q1 2018 to 31% in Q1 2019. Further, as BP’s cash flows rise during the year, the company could see a lower cash flow shortfall or switch to a cash flow surplus. If BP can turn its cashflow position to a surplus, then it would mean a notable improvement in BP’s financial situation.

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