BP announced its 2016 results this morning - here's what the analysts had to say about the oil major's results

 
Caitlin Morrison
Follow Caitlin
Environmental Groups Protest BP Oil Spill In Gulf Of Mexico
BP faced a massive backlash after the 2010 oil spill in the Gulf of Mexico (Source: Getty)

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".

Related articles