Full-year results from BP (BP.) tell two different stories. The first – consensus-beating profitability, a resilient downstream business and a rise in lower-cost output neatly timed to higher oil prices – duly won the headlines. This, together with a near-doubling in return on average capital employed to 11.2 per cent, propelled the oil major’s shares upwards on results day.
Furthermore, with a reserves replacement ratio of 100 per cent for 2018 (or 209 per cent if you factor in acquisitions), BP can claim to be ahead of Royal Dutch Shell on one traditional performance metric.
Unlike Shell, BP’s operating cash flows were hampered (rather than boosted) by working capital, landing at $26.1bn (£20bn) if you exclude $3.2bn-worth of post-tax Gulf of Mexico payments. However, factor those payments in, and cash flow fell short of the combined cost of servicing the dividend and meeting the group’s annual ambition for $15bn-$17bn of "organic" capital expenditure – that is, before big-ticket purchases such as BHP's US shale portfolio.
As such, BP continues to delay balancing its books. Gearing – which the group defines as the ratio of net debt to "the total of net debt plus shareholders’ equity" – is now at 30.3 per cent, above the major’s comfort zone. If this is to fall to 25 per cent by 2020, it looks as though BP will need strong oil prices in addition to the $10bn of divestments planned for this year and next.
Analysts at HSBC expect pre-tax profits of $16.1bn and earnings per share of 47¢ in 2019 (from $20.1bn and 61¢ in 2018).
BP (BP.) | ||||
ORD PRICE: | 548p | MARKET VALUE: | £111bn | |
TOUCH: | 548.1-548.2p | 12-MONTH HIGH: | 603p | LOW: 453p |
DIVIDEND YIELD: | 5.6% | PE RATIO: | 15 | |
NET ASSET VALUE: | 501¢* | NET DEBT: | 43% |
Year to 31 Dec | Turnover ($bn) | Pre-tax profit ($bn) | Earnings per share (¢) | Dividend share (p) |
2014 | 354 | 4.95 | 20.6 | 23.85 |
2015 | 223 | -9.57 | -35.4 | 26.38 |
2016 | 183 | -2.30 | 0.61 | 30.50 |
2017 | 240 | 7.18 | 17.2 | 30.98 |
2018 | 299 | 16.72 | 47.0 | 30.57 |
% change | +24 | +133 | +173 | -1 |
Ex-div: | 14 Feb | |||
Payment: | 29 Mar | |||
*Includes intangible assets of $29.5bn, or 146¢ a share £1=$1.30 |