Group remain on course for strategic change as earnings dive.
Supermajor BP announces 41% slide in Q3 earnings
- The so-called supermajor reports 41% drop in Q3 earnings compared to a year ago.
- Attributes drop to lower upstream earnings which stemmed from lower prices, maintenance and adverse weather.
- Despite negative headline figures, upstream production figures remained solid rising roughly 4% since 2018.
- Investors will welcome early Christmas present following announcement of a dividend of 10.25 cents which will be paid on 20 December.
- Recommendation: With the group’s underlying fundamentals still solid, we continue to recommend the shares as a ‘Buy’ for investors willing to accept a medium level of risk.
All in all, the positive fundamentals of this morning’s results have been masked by unfavourable externalities. Investors should take heart that the group remains on-course to implement its new strategic direction by building new opportunities in fast-growing downstream markets in Asia, and advancing their energy transition having announced a deal to develop an electric charging network in China.
For investors, one of the most important metrics is gearing which rose slightly to 31.7% due to divestment-related impairment charges. BP already has one of the highest gearing ratios in the sector, something that has led to concerns over the sustainability of future dividends, one of BP’s most attractive attributes to investors. However; robust free cash flow growth should help remove some of the burden moving forward and allow BP to reduce this over time.
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