Tuesday, April 26, 2011

BP plc (NYSE: BP): Q1 Earnings Preview 2011

BP plc (NYSE: BP) is scheduled to release first-quarter earnings before the opening bell on Wednesday, April 27, 2011. Analysts, on average, expect the company to report earnings of $1.89 per share on revenue of $71.40 billion. In the year ago quarter, the company reported earnings of $1.79 per share on revenue of $74.42 billion.

BP p.l.c. provides fuel for transportation, energy for heat and light, retail services, and petrochemicals products. The Company operates in more than 80 countries, providing its customers with fuel for transportation, energy for heat and light, retail services and petrochemicals products.

In the preceding fourth quarter, the London, United Kingdom-based company's net income was $5.57 billion compared to $4.30 billion earned in the same period a year ago. BP’s latest quarterly results included a $1 billion pretax charge related to the Gulf spill, taking total charges booked for the year to $40.9 billion. Adjusted replacement cost profit, which strips out one-time items and changes in the oil price, came in at $4.36 billion. Revenue improved 14% to $83.99 billion despite a 9% year-on-year decline in total oil and gas production.

In the past few months, the company has focused on rebuilding its reputation and implementing various changes to its safety procedures following the worst oil spill in U.S. history.

BP returned to a profit in the third quarter, but it posted a loss of $3.7 billion for 2010, its first in nearly 20 years, as a consequence of the disatrous spill in the Gulf of Mexico. In contrast, BP had a profit of $16.6 billion in 2009BP Chief Executive Officer Robert Dudley has set aside $41 billion to cover cleanup and legal costs from the spill, sold off more than $24 billion in assets and focused the company on exploration. Partly as a result of the asset sales BP expects production to decline to around 3.4 million barrels of oil and gas equivalent a day in 2011, down from 3.67 million in 2010.

At its last earnings call in February, BP Chief Executive Bob Dudley said that while the company would continue to divest noncore assets, mostly in upstream, it would also increase its investment in emerging markets. BP said that it plans to increase its capital expenditure to $20 billion in 2011 from $18.2 billion in 2010.

Recently, the company confirmed that it would restart drilling at 10 existing development and production wells in the Gulf in July. The UK oil group has struck a deal with US regulators, under which it will be allowed to drill 10 existing wells that were under way before the accident and which it needs in order to maintain or increase production on existing platforms. BP has also won deep-water exploration licences in Australia and Angola. In his quest for new sources of long-term growth, Dudley struck two deals in rapid succession: a proposed $16bn share swap and Arctic alliance with Rosneft, the Russian state oil champion, and a partnership with India’s Reliance. However, the Rosneft alliance remains blocked and subject to a dispute with BP’s partners in TNK-BP, its existing Russian oil venture.

Meanwhile, the demand for fossil fuels continued to rebound in recent months on an increase in global economic activity. Crude-oil prices have also broken through $100-a-barrel on jitters tied to supply disruptions in Libya and political strife in the Middle East. Oil prices have advanced 23 percent in New York this year.

The company's stock currently trades at a forward P/E (fye Dec 31, 2012) of 6.93 and PEG ratio (5 yr expected) of 1.41. In terms of stock performance, BP shares have gained nearly 90 percent over the past year.

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