BP’s Q3 Earnings Slump but Beat the Estimate

BP’s (BP) third-quarter earnings, which it reported on October 29, fell almost 41% YoY (year-over-year). However, they came in better than Wall Street analysts’ estimated fall of 48% YoY.

BP’s third-quarter revenue stood at $68.3 billion, surpassing Wall Street analysts’ estimate of $64.2 billion. Similarly, its earnings stood at $0.66 per American depositary share, which exceeded analysts’ estimate of $0.59.

However, markets have seemed to ignore the analyst beat and focus on the earnings fall. BP stock fell about 1.2% on the London Stock Exchange after its release.

BP’s earnings review

BP’s earnings, on an adjusted basis, fell 41.3% YoY to $2.3 billion in the third quarter due to a fall in profits across segments. Its earnings fell YoY in its Upstream, Downstream, and Rosneft segments in the quarter.

BP’s Upstream adjusted EBIT fell 47% YoY to $2.1 billion in the third quarter due to weaker realizations partly offset by stronger volumes. The company’s hydrocarbon production increased by 4.4% YoY to 2.57 million barrels of oil equivalent per day in the third quarter. Its production was impacted by Hurricane Barry in the US Gulf of Mexico. Realizations also fell 23% YoY due to lower oil prices.

BP’s Downstream earnings fell 11% YoY to $1.9 billion in the quarter. The fall was the result of lower earnings in its Fuels and Petrochemical segments. However, its refining marker margins stood flat in the quarter. Plus, its adjusted EBIT in its Rosneft segment fell 8% YoY to $0.8 billion in the third quarter.

BP’s earnings: Guidance for the fourth quarter and 2019

In the fourth quarter, BP expects higher upstream production, as it has completed its major turnaround activities. However, in the Downstream segment, it expects lower refining margins in the industry.

For the full year, BP expects its organic capex to be below $16 billion. In the first nine months of 2019, its organic capex stood at $11.3 billion. BP continues to work on optimizing capex, selling noncore assets, and limiting oil spill charges. BP plans to divest more than $10 billion worth of assets in 2019–2020. In the first nine months of the year, BP’s divestments stood at $1.4 billion. The company also expects its oil spill charges to stand at about $2 billion in 2019.

BP’s dividend and buybacks

BP has announced a dividend payment of $0.615 per American depositary share for December 20. Its dividend yield now stands at 6.3%. Royal Dutch Shell (RDS.A) has a relatively low yield of 6.2%. However, other integrated energy companies have lower yields. ExxonMobil’s (XOM), Chevron’s (CVX), and Total’s (TOT) yields stand at 5.1%, 4.0%, and 5.5%, respectively. Suncor Energy (SU) has a yield of 4.1%.

In the third quarter, BP bought back $215 million worth of shares. In 2019, the company plans to buy back shares to offset its scrip dilution since the third quarter of 2017. The company’s buyback program is weighted more toward the second half of the current year.

Peers’ performances

Analysts expect ExxonMobil’s, Chevron’s, and Shell’s EPS to see YoY falls of 54%, 31%, and 26%, respectively, in the third quarter.