http://www.cityam.com/258567/bp-announced-its-2016-results-morning-heres-analysts-had
[links in on-line article]
Tuesday 7 February 2017 9:26am
BP announced its 2016 results this morning - here's what the analysts
had to say about the oil major's results
Caitlin Morrison
BP announced its results for 2016 today, and shares dipped after the
company revealed it had missed forecasts.
The company reported underlying profits fell 56 per cent to $2.6bn
(£2.1bn) from $5.9bn in 2015, causing the stock to fall by more than two
per cent when the market opened.
Here's what the analysts had to say:
Long shadow
*"The Gulf of Mexico oil spill continues to cast a long shadow on BP’s
financial performance*, though the company now expects this to diminish
significantly over the next few years," said Laith Khalaf, senior
analyst at Hargreaves Lansdown.
"The pricing environment remains challenging for the oil majors, and
while things are looking better than they did a year ago, we’re still a
long way short of those halcyon days when oil traded at over $100 a barrel.
"Indeed BP needs oil to fetch $60 a barrel this year to effectively
break even, and with Brent currently trading at around $56, it is still
dependent on fair winds from the commodity markets to push it along."
More mouths to feed
Khalaf noted that BP continues to pay out a quarterly dividend of 10
cents, which works out at an annual yield of almost seven per cent.
"That premium yield reflects the limited scope for dividend growth in
the immediate future, combined with the risk of pressure on the dividend
if commodity markets fall backwards again," he added.
"One worrying aspect of the dividend is the colossal amount being paid
out in shares rather than cash, which increases the number of mouths to
feed next time a payment is made."
Increasing break-even
Brendan Warn at BMO Capital Markets reiterated that BP will need the oil
price to rise to $60 per barrel in order to break even, because it's
planning to add new projects in late 2017 that will require additional
cash in the beginning stages.
However, he added: "Longer term, the new projects such as Zohr, ADCO and
Mauritania-Senegal will deliver greater value and cash flows."
Fragile environment
CityIndex analyst Ken Odeluga said the full-year profit miss wasn't too
surprising "given the still fragile operating environment", but added:
"Lower production and continuing bouts of low visibility over the
group’s marginal expenses will compound investor uncertainties,
particularly after Shell also wrong-footed forecasters last week".
