BP on Tuesday said it swung to a first-quarter loss due to its decision to exit from its shareholding in Rosneft in response to Moscow’s invasion of Ukraine; however on an underlying basis, the oil major reported a big jump in profit.
For the three months that ended March 31, BP swung to an attributable loss of $20.38 billion from a $4.67 billion profit in the first quarter last year. BP said the reported result included pretax adjusted items of $30.8 billion.
By its preferred metric, BP swung to a replacement cost loss of $23.04 billion from a replacement cost profit of $3.33 billion the year before.
The London-based firm attributed the loss to its decision to exit its near-20% shareholding in state-owned Russian oil firm Rosneft. BP said that, in the first quarter, the total post-tax charge for this was $25.5 billion.
On an underlying replacement cost basis, BP reported a profit of $6.25 billion, up 54% from $4.07 billion in the fourth quarter of last year and more than doubled from $2.63 billion a year ago.
Still, BP raised its first-quarter dividend by 4.0% to 5.46 cents from 5.25 cents the year before.
Looking ahead, BP said it expects the short-term outlook for gas prices to remain heavily dependent on Russian pipeline flows to Europe.
BP expects second-quarter underlying upstream production to be lower than in the first quarter. Further, second-quarter production will reflect an additional hit from the absence of production from ‘Russia incorporated joint ventures’, it said.
‘In a quarter dominated by the tragic events in Ukraine and volatility in energy markets, BP’s focus has been on supplying the reliable energy our customers need. Our decision in February to exit our shareholding in Rosneft resulted in the material non-cash charges and headline loss we reported today. But it has not changed our strategy, our financial frame, or our expectations for shareholder distributions.’ said Chief Executive Officer Bernard Looney.
‘Importantly BP continues to perform and step-by-step we are making progress executing our IEC strategy - producing resilient hydrocarbons to provide energy security while investing with discipline in the energy transition,’ Looney added.
BP shares were up 1.8% early Tuesday.
Here is what you need to know at the London market open:
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MARKETS
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FTSE 100: down 0.5% at 7,506.00
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Hang Seng: down 0.1% at 21,067.58
Nikkei 225: Tokyo market closed for holiday
S&P/ASX 200: closed down 0.4% at 7,316.20
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DJIA: closed up 84.29 points, 0.3%, at 33,061.50
S&P 500: closed up 0.6% at 4,155.38
Nasdaq Composite: closed up 1.6% at 12,536.02
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EUR: down at $1.0510 ($1.0547)
GBP: down at $1.2527 ($1.2568)
USD: up at JP¥130.09 (JP¥129.68)
Gold: down at $1,860.40 per ounce ($1,906.75)
Oil (Brent): down at $106.78 a barrel ($110.30)
(changes since previous London equities close)
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ECONOMICS AND GENERAL
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Tuesday’s key economic events still to come
Japan Constitution Memorial Day - Part of Golden Week. Financial markets closed.
China Labour Day holiday continues. Financial markets in mainland China closed.
US Federal Open Market Committee meeting starts.
0955 CEST Germany unemployment
1100 CEST EU unemployment
1100 CEST EU producer price index
0930 BST UK S&P Global-CIPS manufacturing PMI
1000 EDT US manufacturers’ shipments, inventories & orders
1630 EDT US API weekly statistical bulletin
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The Reserve Bank of Australia raised interest rates in an attempt to combat inflation that has ‘picked up more quickly’ than expected. The Sydney-based central bank raised the main lending rate by 25 basis points to 0.35%, the first increase since November 2010. ‘The board judged that now was the right time to begin withdrawing some of the extraordinary monetary support that was put in place to help the Australian economy during the pandemic,’ Governor Philip Lowe said. ‘The economy has proven to be resilient and inflation has picked up more quickly, and to a higher level, than was expected. There is also evidence that wages growth is picking up. Given this, and the very low level of interest rates, it is appropriate to start the process of normalising monetary conditions.’
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BROKER RATING CHANGES
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HSBC raises St James’s Place to ’buy’ (hold) - price target 1,600 (1,650) pence
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HSBC raises M&G to ’buy’ (hold) - price target 260 (220) pence
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Deutsche Bank initiates Mitchells & Butlers with ’buy’ - target 270 pence
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Deutsche Bank research initiates JD Wetherspoon with ’buy’ - target 875 pence
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COMPANIES - FTSE 100
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Cyber security firm Avast reported a fall in first-quarter earnings due to sale of the Family Safety business in 2021. For the three months to March 31, revenue was down to $234.6 million from $237.1 million a year ago. Adjusted earnings before interest, tax, depreciation and amortisation was $127.9 million, down from $133.7 million. In March, Avast had said that it was suspending its operations in Russia and Belarus. Looking ahead, Avast expects low single-digit organic revenue growth and mid-single-digit billings growth for 2022. The cybersecurity firm also said adjusted Ebitda margin for the year is expected to be slightly below 50%. This reflects 10 months with zero sales in Russia, the continued investment in various customer initiatives and increased customer acquisition costs, it explained. Avast said its profit forecast excludes any transaction costs related to its merger with NortonLifeLock. In late March, the UK Competition & Markets Authority said it will refer Avast’s takeover by its US peer to a phase two investigation.
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COMPANIES - SMALL CAP
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Hutchmed (China) said the US Food & Drug Administration has rejected its surufatinib for treatment of pancreatic neuroendocrine tumours. In a complete response letter, the FDA said the current data package, based on two positive phase three trials in China and one bridging study in the US, does not support an approval in the US ‘at this time’. The FDA said a multi-regional clinical trial of surufatinib required for US approval. Surufatinib was approved in China for the treatment of pNETs and extra-pancreatic neuroendocrine tumours in June 2021 and December 2020, respectively. Chief Executive Officer & Chief Scientific Officer Weiguo Su commented: ‘Although this decision from the FDA is disappointing, we remain confident about the clinical value of surufatinib for NET patients and committed to making surufatinib available to patients globally. We look forward to working with the agency to evaluate its feedback.’
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Struggling convenience store business McColls Retail is set to have its shares suspended from the London Stock Exchange as bosses said they would be unable to get its accounts signed off by auditors in time. The retailer has been in discussions with potential lenders to shore up the business, which struggled badly during the pandemic due to supply chain issues, inflation and a heavy debt burden. Shares in the company had already plunged as it reported last month that talks with its lenders and banks would likely leave shareholders empty-handed under rescue efforts. The group, which runs more than 1,100 convenience shops, said: ‘The company confirms it will not be in a position to publish its annual report for the year ended 28 November 2021 by the end of May 2022, as originally intended. Shares are set to be suspended from June 1.
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COMPANIES - GLOBAL
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BNP Paribas reported a strong rise in revenue and profit in the first quarter on the back of the strength of its investment bank. In the three months to March 31, the Paris-headquartered bank recorded pretax income of €3.28 billion, up from €2.82 billion in the same period the year prior. Operating income increased to €3.11 billion from €2.34 billion. Revenue improved to €13.22 billion from €11.83 billion, with net interest income rising to €5.73 billion from €5.45 billion and net commission income up to €2.64 billion from €2.56 billion.
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Tuesday’s shareholder meetings
AVI Japan Opportunity Trust PLC - AGM
CPPGroup PLC - AGM
F&C Investment Trust PLC - AGM
IOG PLC - AGM
Plus500 Ltd - AGM
Smithson Investment Trust PLC - AGM
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