By Christian Moess Laursen
BP is scheduled to report its third-quarter results on Tuesday. Here’s what you need to know:
UNDERLYING REPLACEMENT COST PROFIT: The British oil-and-gas major is expected to book $4.01 billion in underlying replacement cost profit in the quarter, according to the market consensus provided by the company and averaged from 23 analysts. In the second quarter, BP booked $2.59 billion, while it made $8.15 billion in the third quarter a year ago.
REPLACEMENT COST PROFIT BEFORE INTEREST AND TAX: Analysts see BP’s replacement cost profit before interest and tax rise to $7.61 billion from $5.085 billion in the preceding quarter, according to a company-provided market consensus. This would also be an improvement on the third quarter of 2022, when the London-based company reported $5.48 billion.
WHAT TO WATCH:
– SHAREHOLDER DISTRIBUTION: Berenberg analysts expect a stable dividend per share payout of 7.27 cents after the 10% hike to dividends at BP’s second-quarter results, along with a $1.5 billion buyback program, they wrote in a research note. “There remains the chance of an increase to $2 billion in the event that the working capital release is greater than we expect,” they add. Elsewhere, Bank of America expects an even higher buyback guidance of $2.5 billion as the lender forecasts quarterly free cash flow above $4 billion.
– CEO SUCCESSION: The surprise departure of CEO Bernard Looney last month has disrupted the investment case, RBC Capital Markets analysts wrote in a research note, pointing to questions regarding its future strategic direction as it already had pivoted back toward oil and gas earlier in the year. Chief Financial Officer Murray Auchincloss has taken the reigns in the interim. “This uncertainty at the top of the U.K.’s second biggest oil company perhaps helps explain why BP’s share price has underperformed, while the jury remains out as to whether any new CEO will persevere with the ‘Performing while Transforming’ of Bernard Looney,” CMC Markets UK analyst Michael Hewson says in a market comment.
– OIL PRICES & REFINING MARGINS: Brent crude oil managed to break into $96 a barrel in September–a first in 2023–boosted by continued cuts from the Organization of the Petroleum Exporting Countries, while heightened geopolitical uncertainty in the Middle East are currently keeping prices elevated. In addition, “refining margins have been the star of the show this quarter,” RBC Capital Markets said in a research note in regards to the energy sector. BP should see a sequentially better performance from both the upstream and downstream businesses given strength across the crude oil and refined product complex, the Canadian banks said in a different note.
Write to Christian Moess Laursen at [email protected]
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