BP Plc (NYSE: BP) – Q1 FY 2011 Earnings Preview
Tuesday, April 26, 2011 2:24 PM

One of the world's largest oil and gas company in terms of production, BP Plc (NYSE: BP), is scheduled to report its first quarter FY 2011 earnings on April 27, 2011. In the last four quarters, BP's reported EPS exceeded analysts' consensus estimates for quarters ended March 2010, June 2010 and September 2010, by margins of 11.90 percent, 16.10 percent and 17.20 percent. For the quarter ended December 2010, the company's reported EPS missed analysts' consensus estimate by a margin of 13.10 percent.

BP Plc is the holding company of one of the world's largest petroleum and petrochemicals groups. Their main activities are exploration and production of crude oil and natural gas; refining, marketing, supply and transportation; and manufacturing and marketing of petrochemicals. The company operates two segments: exploration and production, and refining and marketing. Exploration and production's activities cover three key areas.

In the fourth quarter FY 2010, BP reported revenue of $83.98 billion, up 14 percent, compared with revenue of $73.63 billion in the fourth quarter FY 2009. Net income for the quarter was $5.56 billion, or $1.47 per share, compared with net income of $4.29 billion, or $1.10 per share, in the fourth quarter of FY 2009. For full year, BP reported revenue of $308 billion, up 25 percent compared with revenue of $246 billion in FY 2009. The company reported a net loss of $3.7 billion or $1.57 per share, for FY 2010, compared with net income of $16.7 billion, or $4.47 per share, FY 2009. The net income of the company was due to high expenditure during the third and the fourth quarter of FY 2010. The company spent $5.5 billion during the fourth quarter and $23 billion for full year 2010.

During the first quarter FY 2011, BP entered into an agreement under which BP will develop three offshore exploration blocks in northern Russia, with Rosneft Oil Co., in a $1.6 billion share swap deal. As per the agreement, BP has agreed on a swap of a 5 percent stake in BP for 9.5 percent stake in Rosneft. It is the biggest deal signed by BP after the Gulf of Mexico oil spill. The agreement strengthens BP's position in Russia. BP already holds 50 percent in TNK-BP venture. However, the proposed deal was opposed strongly by BP's partner Alfa-Access-Renova (AAR) in TNK-BP, saying the BP's decision to enter into a share swap and Arctic exploration deal with Russian oil giant OAO Rosneft, breaches the TNK-BP shareholder agreement. BP recently extended the share swap deadline to May 16 from April 14, announced on January 14.

On April 4, 2011, BP agreed upon the sale of its wholly-owned subsidiary, ARCO Aluminum Inc. to a special purpose vehicle incorporated by a consortium of Japanese companies. Under the terms of the agreement the consortium - comprised of Sumitomo Light Metal Industries, Ltd. (40 per cent), Furukawa Sky Aluminum Corp. (35 per cent), Sumitomo Corporation (20 per cent), Itochu Corporation (2 per cent), and Itochu Metals Corporation (3 per cent) - will pay BP $680 million in cash.

During the first quarter, BP resumed the payment of quarterly dividends, which were suspended in June 2010 following the oil spill in the Gulf of Mexico. On February 1, 2011, BP announced the resumption of quarterly dividend payments, with a fourth-quarter dividend of 7 cents per share. BP has not repurchased any of its common stock in more than a year.

In the major integrated oil & gas industry, BP competes with Exxon Mobil Corp. (NYSE: XOM) and Chevron Corp. (NYSE: CVX). Over the past year, Exxon Mobil reported revenue of $342.60 billion, and an EPS of $6.22 per share. Chevron reported revenues of $189.61 billion, and earnings of $9.48 per share. On the other hand, BP reported revenues of $297.51 billion and a loss of $1.19 per share.

BP has a total market capitalization of $140.76 billion. The P/B and P/S ratio of the company is 1.48 and 0.47, respectively, compared with the industry's P/B and P/S ratio of 1.91 and 1.36, respectively. The net profit margin of the company is 6.95 percent, higher than industry's average margin of 6 percent. The ROE of the company is negative (3.36 percent), compared with the industry's ROE of 13.50 percent.

For the first quarter, analysts' EPS estimates range from a low of $1.54 to $1.88 per share, compared with consensus estimate of $1.75 per share to $1.79 per share in the year ago quarter. For this quarter, analysts' consensus revenue estimate is $71.40 billion, or $74.42 billion in the same quarter a year ago. For the quarter ended March, 2011, the consensus EPS forecast has been increased from $1.65 per share estimated 7 days ago to $1.75 per share.

In the last 52 weeks, the company's stock has been trading in the range of $26.75 and $60.70. The last trading price of the stock is $44.96 on the New York Stock Exchange on April 15, 2011. During the first quarter on March 29, analysts at brokerage firm Collins Stewart downgraded the stock rating to sell from hold.



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