- BP -3.4% premarket after adjusted Q4 earnings of $400M missed the $567M analyst consensus estimate, as profits from oil and gas production rose alongside higher crude prices but were offset by weaker than expected earnings from refining.
- BP's Q4 adjusted downstream profit before interest and tax, which includes refining and trading, fell 28% Y/Y to $877M, saying the partial shutdown of its U.S. Whiting refinery, the company’s largest, hurt sales while the expense of the turnaround drove up costs.
- “Almost all of the majors have missed earnings estimates and the big theme for the quarter has been weaker refining,” says BMO Capital's Brendan Warn. “Maybe people were expecting things to turn around too soon.”
- But unlike Shell and Exxon, which said cash flow now covered spending and dividends at current oil prices, BP said it would not achieve such a balance until the end of the year, and only if Brent crude rises to ~$60/bbl, up from the $50-$55 the company had indicated last year.
- The higher break-even oil price reflects spending associated with acquisitions made in December, including fields around Africa that have yet to begin production; Q4 oil and gas production averaged 2.19M boe/day, down 5.5%% Y/Y and demonstrating the need for new projects.
- BP's cash flow from operations fell to $2.4B in Q4, down 58% Y/Y even as oil price rose in December; net debt continued to rise, with the leverage ratio rising to 26.8% at year-end 2016 from 21.6% a year earlier.