BP plc (BP) reported its first quarter 2010 results of $1.94 per American Depositary Share (ADS), significantly above the Zacks Consensus Estimate of $1.57 and year-earlier profit of 82 cents.
The replacement cost profit for the reported quarter rose 135% to $5.6 billion from $2.39 billion in the year-earlier period. Revenue jumped 55% to $74.4 billion.
Despite a broadly flat production volume, this earnings upside was driven by lower production costs and higher selling prices. The company sold oil for $71.86 per barrel (vs. $41.26 in the year-earlier quarter) and natural gas for $4.26 per thousand cubic feet (vs. $3.63). Total production for the quarter was flat year over year at 4.01 MMboe/d (million barrels of oil equivalent per day, 63% liquids).
The company’s dividend remains unchanged from the year-ago level. We believe that BP’s dividend is safe with the uptrend in oil prices.
However, BP shares were slightly lower in the early day trading, as the market continued to be concerned about the impact of the oil spill from the sunken Deepwater Horizon rig of Transocean (RIG) in the Gulf of Mexico (GoM). The crude spill at the rate of 1,000 barrels per day was caused by broken infrastructure followed by an explosion in the last week. The solid quarterly results were overshadowed by the disaster.
However, the company yesterday said that it is accelerating offshore oil recovery and continuing well control efforts following improving weather conditions in the GoM.
The profit from the refining and marketing business was $729 million, down 33% from the year-ago quarter due to poor refining margin which for the quarter was $3.08 per barrel compared with $6.20 per barrel in the first quarter of 2009. Total refinery throughput increased more than 8% year over year, while refining availability increased to 95.3% versus 92.3% in the first quarter of 2009.
BP spent $4.7 billion as capital expenditures in the reported quarter. The company has reaffirmed its capex budget to be in the range of $22 billion to $23 billion for the year, including disposal proceeds.
Net cash provided by operating activities for the quarter was $7.7 billion, compared with $5.6 billion a year ago. Net debt at the end of the quarter was $25.2 billion, representing a net debt-to-capitalization ratio of 19%.
Though the oil spill could hit the oil major temporarily, BP remains the largest producer in the GoM and has been successfully accessing substantial new resource opportunities. In the last month, the company purchased $7.0 billion assets from Devon Energy Inc. (DVN), which also includes assets in the U.S. deepwater GoM.
While management anticipates a slow and gradual economic recovery this year, we like the company’s initiatives of focusing on upstream exposures and reducing downstream operations.
Read the full analyst report on “BP”
Read the full analyst report on “RIG”
Read the full analyst report on “DVN”
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