British energy giant, BP plc (BP) reported first quarter 2014 adjusted earnings of $1.05 per American Depositary Share (ADS) on a replacement cost basis, excluding non-operating items. The bottom line fell short of the Zacks Consensus Estimate of $1.10 and deteriorated from the year-ago earnings of $1.32. The drag came from lower production and a downcast refining environment.
BP's total revenue decreased 13.3% to $92,988 million in the quarter from the year-ago level of $107,214 million.
Ups Dividend
On the other hand, a resilient BP raised its quarterly dividend by 8.3% to 58.5 cents per ADS. The dividend would be paid on Jun 20 to ADS holders as of May 9.
Production and Price Realization
Total production of 2.131 million barrels of oil equivalent per day (MMBoe/d) was down 8.5% year over year, mainly due to the effects of the Abu Dhabi onshore concession expiry in January and divestments. However, new major project volumes in the North Sea, Angola and the Gulf of Mexico partly offset the downfall.
The company sold liquids for $97.16 per barrel in the first quarter (versus $103.11 in the year-earlier quarter) and natural gas for $6.20 per thousand cubic feet (versus $5.52). Overall price realization rose 1.6% to $66.16 per Boe from the year-ago level of $65.11 per Boe.
Dampened by depressed liquid price realizations and lower volume, the Upstream segment experienced nearly a 22.8% year-over-year decrease in adjusted underlying profit.
Downstream
The Downstream segmental profit fell to $1,011 million from $1,641 million in the year-ago period. The result reflects the impact of a weak fuels business along with a downcast refining environment.
Refining Marker Margin decreased to $13.3 per barrel from $17.4 in the first quarter of 2013. Total refinery throughput decreased to 1,720 thousand barrels per day (MB/d) from 2,065 MB/d in the year-earlier period. Refining availability was 95.0% against 95.1% a year ago.
Rosneft
The Rosneft segment includes equity-accounted earnings from associates, representing BP’s stake in the former. The segment posted profits of $271.0 million in the reported quarter.
Financials
BP's net debt was $25,258 million at the end of the first quarter compared with $17,663 million a year ago. Net debt-to-capitalization ratio was 16.2% versus 11.9% in the first quarter of 2013. In the reported quarter, BP's total capex was $6,085 million. Net cash provided by operating activities was $8,231 million versus $3,967 million in the year-ago quarter.
Company Outlook
BP expects second quarter production to be lower than the first quarter primarily due to planned major turnaround activity, mainly in the higher-margin North Sea and Gulf of Mexico regions. However, refining margins are expected to improve on the back of low product stocks, particularly in the U.S., and increased global turnaround activity. This would be offset by weak petrochemical margins.
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 RSP Permian, Inc. (RSPP) and Clayton Williams Energy, Inc. (CWEI), each sporting a Zacks Rank #1 (Strong Buy).
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