British energy giant, BP plc (BP) reported fourth quarter 2013 adjusted earnings of 90 cents per American Depositary Share (ADS) on a replacement cost basis, excluding non-operating items. The bottom line fell a penny short of the Zacks Consensus Estimate and decreased 25.6% from $1.21 earned a year ago as depressed downstream operations and lower liquid realizations played spoilsport.
BP's total revenue decreased 4.7% to $95,096 million in the quarter from the year-ago level of $99,811 million. However, the top line compares favorably with the Zacks Consensus Estimate of $91,726 million.
Full-year 2013 adjusted earnings came in at $4.26 per ADS on a replacement cost basis, missing the Zacks Consensus Estimate of $4.38 per ADS. Similarly, the full-year figure experienced a year-over-year downfall of 20.8%. Total revenue increased 2.1% to $396.2 billion in 2013 from $388.1 billion in the prior year.
Production and Price Realization
Total production of 2.246 million barrels of oil equivalent per day (MMBoe/d) was down 1.9% year over year, mainly due to field declines and divestments. However, new major project volumes in the North Sea, Angola and the Gulf of Mexico partly offset the downfall.
Full-year 2013 oil and gas production decreased 2.7% to 2.256 MMBoe/d from the prior-year level of 2.319 MMBoe/d.
The company sold oil for $98.26 per barrel in the fourth quarter (versus $100.00 in the year-earlier quarter) and natural gas for $5.49 per thousand cubic feet (versus $5.03 in the year-earlier quarter). Overall price realization rose 4.3% to $65.04 per Boe from the year-ago level of $62.38 per Boe.
Dampened by depressed liquid price realizations and lower volume, the Upstream segment experienced nearly a 12.9% year-over-year decrease in adjusted underlying profit.
Downstream
The Downstream segment digested a loss of $360 million in the quarter, down from the year-ago profit level of $1,329 million. The result reflects the impact of weak fuels business along with a downcast refining environment.
Refining Marker Margin decreased to $11.0 per barrel from $16.9 in the fourth quarter of 2012. Total refinery throughput decreased to 1,695 thousand barrels per day (MB/d) from 2,350 MB/d in the year-earlier period. Refining availability, however, rose to 95.6% from 95.0% a year ago.
Rosneft
The Rosneft segment includes equity-accounted earnings from associates, representing BP’s stake in the former. The segment posted profit of $1,087.0 million in the reported quarter.
Capital Expenditure
In the reported quarter, BP's total capex was $7.2 billion of which as much as $7.1 billion was organic. BP estimates total capex at $24 billion to $25 billion for 2014. Starting next year through to the end of the decade, the British giant predicts a series of organic capital expenditure between $24 billion and $27 billion per annum.
Balance Sheet
BP's net debt was $25.2 billion at the end of the fourth quarter compared with $27.5 billion a year ago. Net debt-to-capitalization ratio was 16.2% versus 8.7% in the fourth quarter of 2012.
Net cash provided by operating activities was $5.4 billion versus $6.4 billion in the year-ago quarter.
Company Outlook
BP expects full-year 2014 production level to be lower than 2013 due to the expiry of the Abu Dhabi onshore concession and the effect of divestments.
For 2014, the company expects refining margins to improve from the 2013 level due to turnaround activity. Additionally, the company expects to see increased exposure to heavy crude differentials in the U.S. owing to ramped up heavy crude processing at the Whiting refinery.
Zacks Rank
BP – U.K.’s third largest oil company by market value after Royal Dutch Shell plc (RDS.A) – holds a Zacks Rank #3, which is equivalent to a Hold rating for a period of one to three months. However, there are better-ranked stocks in the oil and gas sector. These include Cabot Oil & Gas Corp. (COG) and Imperial Oil Ltd. (IMO), each sporting a Zacks Rank #1 (Strong Buy).
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