BP’s profit hits $5 billion but shares slip on slowing buybacks

BP plc BP shares are trading higher by 1.5% to $39.17 during Tuesday’s session. Shares of several oil companies are trading higher after OPEC maintained its growth forecasts and forecasted a supply shortfall. Investors should also pay attention to BP’s average 20-day trading volume.

• The stock of BP has collapsed near its 25-year lows for various reasons.
• BP’s stock is owned by a variety of retail and institutional investors.
• Mending the balance sheet is another one of its key goals today, along with completely reshaping the company.
• BP trades at less than four times forward adjusted earnings, even after strong price action in recent months.
• The company expanded into Alaska in 1959 and then accelerated its expansion when it merged with Amoco in 1998.

The company is one of the more leveraged names in the integrated energy peer group. This limits its flexibility to maneuver in the face of adversity. To put a number on that, BP’s debt-to-equity ratio has spiked to 1.1 during the current energy downturn. That’s higher than any of its closest peers and over four times higher than Chevron (CVX -0.12%). Although European energy companies tend to hold more debt and more cash than U.S. peers, BP’s leverage is extremely high. Historically low energy prices in 2020, caused partially by the impact of COVID-19-related economic shutdowns, have pushed BP’s bottom line deep into the red.

BP falls Thursday, underperforms market

With no end in sight to the Russia-Ukraine war, Russia’s exports are unwanted in much of the world, putting a real supply strain on oil markets. At the heart of BP’s reinvention is a reduction in oil and gas production and simultaneous growth in its renewables business. Looney promised investors he could do this while delivering returns of 8% to 10%.

While all these are bearish signs, the stock has also formed a falling wedge pattern that is shown in purple. Therefore, the stock will likely bounce back since a falling wedge is usually a bullish reversal sign. If this happens, the next key resistance point to watch will be at 400p. A drop below the support at 350p will invalidate the bullish view. It announced that it reduced its net debt to over $27.5 billion even as it added its share buyback by $2.5 billion. In addition, analysts believe that the company will boost its assets by adjusting the value of its assets.

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This expectation of reduced supply often leads to an increase in oil prices. BP, as a major oil and gas company, can benefit from higher oil prices because it can sell its oil and gas products at higher prices, potentially boosting its revenues and profits. BP’s recent financial performance has been supported by higher energy prices, which climbed to over $120 a barrel earlier this year and currently Brent, the international benchmark trades at $93/barrel at time of writing.

The company has also moved on from the 2010 Gulf of Mexico disaster, reduced its debt and outlined a plan to reduce its exposure to oil and gas by boosting renewable energy output. Global oil and gas markets have responded the only way free markets know how when demand outweighs supply – prices have spiked. It could indeed even be in terminal decline because I’m unconvinced green energy will offer declines in oil production. This is why I believe there are better FTSE 100 companies to invest in. The turnaround and the transition into a greener energy player could go very well, or investors could be willing to buy the shares in anticipation of more sustainable future returns.

BP & Equinor Demand Offshore Wind Power Price Increases

Shell is currently trading with a Forward P/E ratio of 4.94 while its PEG ratio sits at 0.52. Both of the company’s metrics compare favorably to its industry’s average P/E of 6.97 and average PEG ratio of 0.51. The P/B is a method of comparing a stock’s market value to its book value, which is defined as total assets minus total liabilities. This stock’s P/B looks solid versus its industry’s average P/B of 1.53. Over the past year, BP’s P/B has been as high as 1.42 and as low as 0.96, with a median of 1.16. Looney said BP’s experience, integration, low borrowing costs and trading prowess, but the market is likely to remain skeptical until such returns can be demonstrated in practice, analysts at Redburn wrote in a research note.

As a result, those who purchase BP near its 25-year lows are likely to be highly rewarded. On the other hand, investors should be aware of the aforementioned risk factors that will weigh on the stock in the unlikely event of a prolonged pandemic. As such, while shares in Shell and BP do look cheap at first glance, investors need to carefully consider where these businesses are heading and the challenges they may face going forward. Windfall oil profits may only be temporary, while capital spending obligations are forever.

Clearly, a global recession would be bad for oil and gas prices and refining margins, reducing BP’s profitability. But in my view, this has already been priced in, and more, into BP’s stock. It is focused on rolling out electric vehicle charging stations and at increasing basket sizes to capture higher margins at its service stations. So, while the long-term demand for oil might be downwards, BP knows this, and along with Shell plc (SHEL), is the supermajor that realizes this best.

This European oil major has made some big changes lately, but are they enough to make it worth buying?

© 2023 Market data provided is at least 10-minutes delayed and hosted by Barchart Solutions. Information is provided ‘as-is’ and solely for informational purposes, not for trading purposes or advice, and is delayed. To see all exchange delays and terms of use please see Barchart’s disclaimer. The consensus rating score for BP is 2.50 while the average consensus rating score for oils/energy companies is 2.54. For example, by 2030 it expects to reduce its oil production by a huge 40%. Meanwhile, management intends to put as much as 40% of its capital spending each year into non-oil investments.

Shell’s earnings look likely to more than double, from $1.72 per share to $4.80. A mismatch between supply and demand was already causing prices to rise at the beginning of the year, before check perfume batch code the war in Ukraine added fuel to the fire. We have taken reasonable steps to ensure that any information provided by The Motley Fool Ltd, is accurate at the time of publishing.

Let’s discuss some of the components of the Momentum Style Score for BP that show why this oil and gas company shows promise as a solid momentum pick. In order to see if BP is a promising momentum pick, let’s examine some Momentum Style elements to see if this oil and gas company holds up. While many investors like to look for momentum in stocks, this can be very tough to define.

The company made a $1.1 billion splash in offshore wind earlier this month, buying a stake in developments owned by fellow oil giant Equinor. He took the top job at the company in 2020, and quickly set out an ambition for BP to “become a net zero company by 2050 or sooner”. Looney pledged to build up the company’s operations in low-carbon pursuits, including renewable energy and electric vehicle charging.

BP’s Forward P/E has been as high as 7.66 and as low as 3.94, with a median of 5.52, all within the past year. The firm’s business has been helped by the relatively higher demand around the world. At the same time, the company has suffered because of the crisis in Ukraine that saw it report a $20.4 billion loss in the first quarter. Nevertheless, its underlying replacement cost profit rose to more than $6.2 billion, while the reduction of equity was about $14.7 billion. However, he came under pressure from investors who wanted BP to focus on its oil and gas business, and green campaigners urging the company to move more quickly away from fossil fuels. Since then, BP shares have increased by 9.1% and is now trading at $38.10.

BP boss Bernard Looney resigns after failing to reveal relationships with colleagues

However, it said its board “sought and was given assurances by Mr Looney regarding disclosure of past personal relationships, as well as his future behaviour”. Bernard Looney, who spent his entire career with the oil and gas multinational, departed the £88bn company with immediate effect, less than four years into his tenure. BP shares fell on Wednesday after the previous night’s shock announcement that its chief executive had resigned having admitted to failing to fully detail relationships with colleagues. Click the link to learn what streetwise investors need to know about the metaverse and public markets before making an investment. The London-based company repurchased a total of $11.7 billion worth of shares in 2022. The smaller target is a result of a significant drop in operating cash flow to $7.6 billion during the quarter from $13.5 billion in the final quarter of 2022.

• While the proven Zacks Rank places an emphasis on earnings estimates and estimate revisions to find strong stocks, we also know that investors tend to develop their own individual strategies.
• Founded in 1993 by brothers Tom and David Gardner, The Motley Fool helps millions of people attain financial freedom through our website, podcasts, books, newspaper column, radio show, and premium investing services.
• A good momentum benchmark for a stock is to look at its short-term price activity, as this can reflect both current interest and if buyers or sellers currently have the upper hand.

Founded in 1993 by brothers Tom and David Gardner, The Motley Fool helps millions of people attain financial freedom through our website, podcasts, books, newspaper column, radio show, and premium investing services. Bloomberg says this is mainly due to Saudi Arabia’s extension of production cuts. Despite tightening market conditions, Saudi Arabia has prolonged an additional 1 million-barrel-per-day output reduction until year-end. But for the outlook for 2023, with a slowing global economy, hawkish monetary policy the world over, and high inflation in my opinion not being temporary, quality energy companies are a good place to be. Afterall, Warren Buffett has large stakes in Chevron (CVX) and Occidental Petroleum (OXY).

The net-debt-to-equity ratio is only 30%, which means BP is less exposed to the higher interest rate environment we are going to find ourselves in. 2023, in my mind, will see a flight to quality in equites, defined by stocks with high free-cash https://1investing.in/ flow and shareholder return ability. While the proven Zacks Rank places an emphasis on earnings estimates and estimate revisions to find strong stocks, we also know that investors tend to develop their own individual strategies.