BP and BG: Looking into the cryst-oil ball
Hot on the heels of Royal Dutch Shell’s predictably poor results last week, the market is not feeling too optimistic over tomorrow’s corporate updates from FTSE 100 oil peers BP and BG.
BG ‘did a Shell’ last week, slashing forecasts right, left and centre ahead of its results announcement, so the market already knows that 2013 earnings will be down around 33 per cent, with production downgraded for the fourth time in 18 months.
Shares plunged almost 14 per cent on the day and haven’t seen much of a recovery since.
“BG has rather jumped the gun with its profit warning last week,” said oil and gas analyst Malcom Graham-Wood.
“The bounce has been less than that of a dead cat and it’s going to be a long haul to get any shareholder value, even from here. The ‘for sale’ sign has to be put up – I don’t mind if it disguises itself as a strategic review as is often the case.”
Investec’s outlook is also rather gloomy. “It’s not clear what is left to discuss at the results presentation, save for picking over the bones of its shock profit warning last week,” said the broker.
“The market will likely seek more information on the disruptions in Egypt and seek reassurance that the two key drivers (Brazil and Australia) are progressing to plan.”
Meanwhile BP may be the only one of the three oil giants to have not issued a profit warning ahead of its results, but that doesn’t mean its shareholders are sitting comfortably. The market is expecting a 27 per cent drop in fourth-quarter results, as weak oil prices continue to weigh on this stock as much as the others.
Either way, when it comes to BP, the figures won’t be the only focus – not when the aftermath of the infamous Deepwater Horizon disaster continues to blight the company.
Years after the oil spill in the Gulf of Mexico, the multi-billion dollar claims keep coming, with BP still fighting to limit the cost of its compensation settlement through the US courts.
As Graham-Wood puts it: “BP is fighting in the US courts on a number of levels and only a settlement is likely to cheer the marketplace in the meantime paranoia about being victimised still hangs over the company like a Shakespearian ghost.”
Deutsche Bank is not too hopeful about BP’s results either. “We expect BP's fourth-quarter results to reflect a challenging final few months of the year,” it said.
“Upstream results are expected to be impacted by exploration write-offs, currency impacts at Rosneft and deteriorating price differentials in the US Gulf of Mexico whilst downstream challenging margins in refining, most particularly ex-US, are expected to hide the underlying progress.”