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BP Profit Smashes Estimates on Eve of Giant Shale Oil Deal

Published 10/30/2018, 03:42 AM
Updated 10/30/2018, 03:50 AM
© Reuters.  BP Profit Smashes Estimates on Eve of Giant Shale Oil Deal

© Reuters. BP Profit Smashes Estimates on Eve of Giant Shale Oil Deal

(Bloomberg) -- BP (LON:BP) Plc reported a surge in profit that smashed estimates, giving the company the confidence to fully fund its $10.5 billion U.S. shale oil deal with cash.

  • Adjusted net income climbed to $3.84 billion in the third quarter from $1.87 billion a year ago. That’s the most since 2012, beating even the highest analyst estimate of $3.23 billion.

Key Insights

  • The acquisition of BHP Billiton (LON:BLT) Ltd. oil assets will be completed on Wednesday and “transform our position in the U.S. Lower 48,” Chief Executive Officer Bob Dudley said in a statement.
  • Citing “confidence in cash generation,” BP said it no longer plans to issue new shares to fund the purchase. Instead it will cover the whole deal with cash if “oil prices remain firm in the recent trading range.”
  • That means the ratio of net debt to equity will edge above the company’s target of 30 percent in the first quarter. BP will need oil prices to stay strong and execute its divestment plan.
  • Proceeds from $5 billion to $6 billion of asset sales announced in connection with the shale deal will now be used to reduce debt. BP said gearing should fall back toward the middle of its 20 to 30 percent target range by the end of next year.

Know More

  • The reliability of BP’s refineries was the highest in 15 years, but that performance may not be repeatable due to maintenance at the Whiting plant in the U.S.
  • Operating cash flow excluding Gulf of Mexico oil spill payments and including working capital for the quarter was $6.6 billion, unchanged from a year earlier.
  • Oil and gas production of 3.6 million barrels equivalent a day was flat.
  • Click here for more details on the earnings.

(Updates with details of gearing in fourth bullet.)

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