This shift has caused great uncertainty over the future prospects of BP and thus it has taken its toll on the stock of the oil major. Ron has covered since 2014 the world’s top oil and gas companies, focusing on their efforts to shift into renewables and low carbon energy and the sector’s turmoil during the COVID-19 pandemic and following Russia’s invasion of Ukraine. He has been named Reporter of the Year in 2014 and 2021 by Reuters. Before Reuters, Ron reported on equity markets in New York in the aftermath of the 2008 financial crisis after covering conflict and diplomacy in the Middle East for AFP out of Israel. BP is a major player in the global oil market, and any disruptions in the oil supply chain tend to increase oil prices, benefiting companies like BP that are involved in oil exploration, production and distribution. BP share price will next react to the ongoing volatility of oil prices.
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So without further ado, here are the five reasons why I think the BP share price looks undervalued. But I reckon it’s only a matter of time before the company’s turnaround starts to gain traction. Volatility profiles based on trailing-three-year calculations of the standard deviation of service investment returns.
Those impairments were the key reason behind BP’s $20.4B loss in the first-quarter, despite strong execution in the production business. It could initially seem that their relative underperformance simply stems from poor financial results, which normally goes hand-in-hand with a company that significantly reduced their dividends. Although once digging deeper into their financial performance, both BP and Shell have actually seen a recovery that even bests the higher-performing Chevron (CVX). The latter saw their operating cash flow excluding working capital for the first quarter of 2021 reach $5.1b versus their higher previous result of $5.8b during 2020, as per their first quarter of 2021 results presentation. Whilst this shows a decent recovery, BP and Shell have actually seen their respective equivalent results exceed their previous results from the first quarter of 2020, as was already discussed within two of my previous articles (1) (2).
Fuel demand in Europe has been “a little bit” soft while consumption in China has been strong following the lifting of pandemic restrictions, BP Chief Financial Officer Murray Auchincloss told analysts on a call. First-quarter underlying replacement cost profit, BP’s definition of net income, reached $4.96 billion, up from $4.8 billion in the fourth quarter of 2022 and above expectations of $4.3 billion in a company-provided survey of analysts. The smaller target is a result of a significant drop in operating cash flow to $7.6 billion during the quarter from $13.5 billion in the final quarter of 2022.
Rupert Hargreaves explains why he thinks the BP share price is deeply undervalued considering these five tailwinds driving growth. The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.
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Investors have generally been quite wary of the fairly new CEO’s plans to go green. The first is that oil is a cash cow and has done well for many investors for many years, so they would prefer to see BP stick to what it’s good at. There may also be a belief that oil will still be needed for a long time on ifc markets reviews to come, alongside growing sustainably sourced energy. The Zacks Industry Rank gauges the strength of our industry groups by measuring the average Zacks Rank of the individual stocks within the groups. Our research shows that the top 50% rated industries outperform the bottom half by a factor of 2 to 1.
For investors still looking for an oil play, conservatively financed Chevron is probably a better option. It’s entirely possible that BP pulls off its big plans for change without a hitch. But most investors would probably be better off watching that transformation safely from the sidelines for now. BP will still exceed its goal of using 60% of surplus cash to buy its own shares, but investors were disappointed and its forecast for lower oil and gas production in the second quarter also weighed on investor sentiment. Shares of BP currently offer a 4% dividend yield, which is covered by BP’s free cash flow.
Moreover, the liabilities of BP for its catastrophic accident in 2010 have essentially erased all the earnings of the company throughout the last decade. In addition, they still consume a significant portion of the cash flows of the oil major every year. Given also the extremely generous dividends of BP over the last decade, it is easy to understand how the oil major has accumulated an excessive debt load.
Henry Hub natural gas was $1.70 in the second quarter, the lowest level in 25 years. Moreover, due to the slump in the demand for refined products, the refining margin of BP fell 61%, from $15.20 in the prior year’s quarter to $5.90, and its refinery utilization plunged from 89% to 70%. All these major headwinds led BP to switch from an adjusted profit of $2.8 billion in the prior year’s quarter to a loss of -$6.7 billion.
The London-based company repurchased a total of $11.7 billion worth of shares in 2022. Blood pressure naturally fluctuates throughout the day, and it review cycle analytics for traders declines with age. Longer lasting low blood pressure may result from a temporary issue, a chronic illness, or an emergency, such as septic shock.
The ratios, though, are roughly in line with UK-listed competitor Shell. Valuation is also important, so investors should note that itrader review BP has a Forward P/E ratio of 6.99 right now. This valuation marks a premium compared to its industry’s average Forward P/E of 6.89.