BP posts better-than-expected profits and cash flow, output higher
Net income beats, OCF flattered by IFRS 16
Bigger-than-expected Macondo charges one potential blemish
Oil major BP posted better-than-expected first quarter profits and cash flows for the first three months of 2019, together with higher output.
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Underlying replacement cost profit for the first three months of 2019 fell to $2.36bn from $2.57bn in the comparable year ago period, driven by lower prices and margins, although "strong" supply and trading results acted as a partial offset.
That was better than the company compiled consensus for $2.3bn.
Excluding changes in the outfit's working capital requirements and payments related to the Macondo oil spill in the Gulf of Mexico, operating cash flows came in at $6.9bn, versus the $6.2bn anticipated by analysts at RBC.
Working capital increased by $1.0bn during the period.
The company made payments of $0.6bn during the quarter linked to the Gulf of Mexico oil spill, which was twice what some analysts had penciled-in.
Even excluding that from Rosneft, output from the upstream division was up by 2% versus a year ago.
The adoption of IFRS 16 had only a negligible effect on the company's replacement cost profit and none at all on its free cash flow, the company said in a statement.
Nevertheless, BP estimated that the change to the new IFRS 16 accounting methodology for leases boosted by its operating cash flow figure by $0.5bn.
At $45.1bn, net debt was 14.8% higher than a year ago, pushing the company's so-called level of gearing to 30.4% (consensus: 29.9%), versus the year-end 2018 level of 30.0% and 27.8% one year before.
Looking out to the second quarter, BP guided for production to be "broadly flat" versus the first three months of 2019, with the ramp-up of major projects and the ongoing seasonal turnaround and maintenance activities in high margin regions offsetting each other.
For the full-year, BP pegged 2019 organic capital expenditure to be in a range of $15-17bn (Bloomberg: $16.2bn).
BP raised its quarterly dividend by 2.5% to 10.25p per share.
Commenting on the latest set of numbers from the oil giant, Richard Hunter at Interactive Investor told clients: "The company’s prodigious cash flow continues to enable its share buyback programme, which will ramp up further in the second half of the year.
"Meanwhile, there is also an increase to the dividend in the quarter, which will add to an already attractive yield of 5.6%. The company now has operational control of BHP, which should lead to the synergies previously identified in due course, while the more recent strength in the oil price, which should filter through in the second quarter, will further bolster the numbers.
"[...] Overall, however, progress may be complicated but it is clearly visible. The shares have also seen the benefit of BP’s stated objectives, having risen 3% over the last year, which compares to a dip of 1% for the wider FTSE100 and having spiked 10% in the last three months alone.
For their part, analysts at RBC highlighted the contribution to the company's bottom line from its downstream unit, telling clients that it "appeared" as if the Fuels division was the key differentiator versus their own estimates.
But there was a blemish, in the form of the charges linked to Macondo, which outstripped their own forecasts for a third consecutive quarter.
"BP guides to $2bn in charges for 2019, however in Q2 there is already a defined charge of $1.2bn, implying very little headroom left for any further BEL claims for the remainder of the year."
As of 0829 BST, shares of BP were 0.81% higher to 557.0p.
-- More to follow --