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BP plc (BP) Q2 Earnings Top on Higher Project Activities

British energy giant BP plc BP reported better-than-expected earnings in second-quarter 2017, primarily owing to higher liquid and gas prices realizations. Ramp up of key developments during the quarter also supported the outperformance. The positives were partially negated by lower refinery throughput and significantly higher exploration expenses.

The company reported second-quarter adjusted earnings of 21 cents per American Depositary Share (ADS) on a replacement cost basis, excluding non-operating items. The bottom line surpassed the Zacks Consensus Estimate of 11 cents but declined from the year-ago earnings of 23 cents.

BP's total revenue was $57,366 million in the quarter. Revenues increased from the year-ago level of $47,276 million but missed the Zacks Consensus Estimate of $64,514 million.     

BP becomes another integrated supermajor after Royal Dutch Shell plc RDS.A, ExxonMobil Corp. XOM and Chevron Corp. CVX in reporting second quarter numbers.

Operational Performance

Upstream

In the second quarter, total production inched up 9% year over year to 2.431 million barrels of oil equivalent per day (MMBoe/d). Key project ramp ups primarily drove the upside.

The company sold liquids at $46.27 a barrel in the second quarter as against $39.68 in the year-earlier quarter. It sold natural gas at $3.19 per thousand cubic feet, compared with $2.66 a year ago. Overall price realization increased to $33.59 per Boe from the year-ago level of $28.66.      

After adjusting for non-operating items and fair value accounting effects, underlying replacement cost profit before interest and tax for the segment was $710 million, as against $29 million in the year-ago quarter. The improvement was driven by increased liquid and gas price realizations as well as improved production.

Downstream

Segmental profits fell to $1,413 million from $1,513 million in the year-ago quarter. The deterioration is attributable to decreased refinery throughput.     

Refining Marker margin of $13.8 per barrel in the second quarter of 2017 was in line with the year-ago comparable quarter. Total refinery throughput decreased to 1,688 thousand barrels per day (MB/d) from 1,704 MB/d in the year-earlier period. Refining availability was 94.5%, compared with 95.7% in the year-ago period.

Rosneft

The Rosneft segment includes equity-accounted earnings from associates owing to BP’s stake in the former. The segment reported profits of $279 million, compared with $246 million in the year-ago quarter.

Exploration Expenses

During the quarter, BP’s cost from exploration came in at $850 million, as against $350 million in the prior-year quarter.

Financials

BP's net debt was $39,794 million at the end of the second quarter, compared with $30,931 million in the year-ago quarter. Net debt-to-capitalization ratio was 28.8% as against 24.7% a year ago.

Outlook

BP expects production during third-quarter 2017 to be in line with the April–June quarter of this year owing to a consistent ramp up in key developments. However, maintenance works and seasonal turnaround activities may limit the upside. 

For third-quarter 2017, the company expects refining margin to remain flat with second-quarter 2017 levels.

Second-Quarter Share Price Performance

BP has gained 0.4% in the April-to-June quarter of this year versus the 3.1% decline of its industry.

Zacks Rank

Currently, BP carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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BP p.l.c. (BP): Free Stock Analysis Report
 
Chevron Corporation (CVX): Free Stock Analysis Report
 
Royal Dutch Shell PLC (RDS.A): Free Stock Analysis Report
 
Exxon Mobil Corporation (XOM): Free Stock Analysis Report
 
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