Stock Under Focus: BP Plc

BP PLC

London-headquartered global energy business, BP Plc (Identifier: BP.), is a vertically integrated group with operations in all areas of the oil and gas industry, ranging from upstream, downstream and renewables businesses to manufacturing and marketing fuels and raw materials. The group successfully mitigates exposure to geopolitical events by diversifying across geographical regions, giving it access to growing markets and new resources, and the impact of commodity pricing cycles is cushioned with the help of well-established trading capabilities and a diverse portfolio. By developing and using technology to reduce costs and risks, the group can competitively explore new resources, with customers ranging from independent power producers to utilities and municipalities. The group also has renewable energy interests in solar technology, wind power and biofuels, and is the largest trader of natural gas in North America.

The company’s underlying replacement cost profit was recorded at $2.3 billion in the third quarter of fiscal year 2019 as against $3.8 billion a year ago. The company’s result was impacted from lesser prices, maintenance and weather impacts leading to lower Upstream earnings. A non-cash, non-operating after-tax charge, divestment-related amount of $2.6 billion led to loss (reported) of $0.7 billion for the quarter. The company’s operating cash flow (which excluded Gulf of Mexico oil spill payments) was recorded at $6.5 billion for the third quarter of fiscal year 2019. The company’s Gulf of Mexico payments were recorded at $0.4 billion (post taxation). The company announced a dividend of 10.25 cents per share for the Q3 FY19. The company suspended the option of scrip dividend for Q3 FY19.

BP.-Financial highlights for H1 FY19

Compared to a profit of $2,799 million and $5,268 million in the second quarter and the first half of 2018, respectively, profit was $1,822 million and $4,756 million for the corresponding periods in 2019. The company reported basic earnings per share was 23.47 cents in the first half and 8.95 cents in the second quarter of 2019, respectively. The group announced a dividend (for the second quarter of 2019) of 10.25 cents per ordinary share subsequently. Excluding Gulf of Mexico oil spill payments, operating cash flow was $14.2 billion for the first half and $8.2 billion for the second quarter of 2019, respectively, while net debt as on 30 June 2019 was $46.5 billion, compared with $38.7 billion a year ago.

The prices of various commodities which the company markets can be subject to significant fluctuations, and as the prices are affected by global supply and demand, the company does not have any influence on the market prices, which can lead to a significant impact on the financials and affect the business assumptions. In the short-term, the company expects to face challenges from macroeconomic and geopolitical uncertainties, not least from the continuing global trade tensions, which has impacted global growth.

The group is well mitigated against any downside risk in any one region or commodity, as the group owns and operates assets in a wide range of commodities across many countries, offering the group a much-needed diversity. With the help of ongoing operating cash flow delivery and disposal proceeds from the $10 billion programme, the company expects gearing to trend down through 2020. By lowering costs through deploying new technologies and deploying rigorous cost minimisation programs, the company seeks to maximise output from its portfolio in an efficient way. The diversity in operations and strong industry connections underpin the future growth of the company, supported by strong fundamentals.

BP.-Operating Segments

There are four differentiated operating segments in which the group operates, Roseneft, Business & Corporate, Upstream & Downstream. Oil and natural gas exploration, field development and production constitutes the company’s Upstream segment. It also includes the marketing and trading, storage and processing, and midstream transportation of natural gas. The Downstream segment is made up of three businesses and is the product and service-led arm of BP, managing global marketing and manufacturing operations, along with trading, supply, transportation and refining of crude oil, petroleum, petrochemicals products and related services. Corporate activities worldwide, shipping and treasury functions, and the biofuels and wind businesses of the group forms part of the Business & Corporate segment.

BP.-Share price performance

(Source: Thomson Reuters)

On 29th October 2019, while writing at 01:01 PM GMT, BP Plc shares were clocking a market price of GBX 496.90 per share, which was down by 2.94 per cent in comparison to the last traded price of the previous day. The company’s market capitalisation was at £103.85 billion at the time of writing.

On 23rd April 2019, the shares of BP. have touched a new peak of GBX 583.41 and reached the lowest price level of GBX 479.55 on 03rd October 2019 in the last 52 weeks. The company’s shares were trading at 14.82 per cent lower from the 52-week high price mark and 3.61 per cent higher the 52-week low price mark at the current trading level as can be seen in the price chart.

The stock’s traded volume was hovering around 18,021,571 at the time of writing before the market close. The stock’s 5-day average daily traded volume was 29,286,231.60; 30 days’ average daily traded volume- 31,049,050.20 and 90 days’ average daily traded volume – 31,378,558.74. The volatility of the company’s stock is higher as compared with the index taken as the benchmark, as the beta (5Y monthly) of the company’s stock was recorded at 1.41.

The shares of the company have delivered a negative return of 2.10 per cent in the last quarter. The company’s stock surged by 3.24 per cent from start of the year to till date. The company’s stock has given investors 3.05 per cent of negative return in the last year.Â