Less than a week after Royal Dutch Shell (RDSB) came up short on fourth quarter expectations its peer BP (BP.) is doing the same.
But unlike Shell, which had a positive story to tell on debt and cash flow, BP is unable to earn the market’s forgiveness and the shares are marked down 3% to 462p.
PROFIT MISS
Headline profit came in at $400m, well short of the $567.7m pencilled in by the consensus. Unlike Shell and US rival ExxonMobil (XOM:NYSE), BP is unable to cover spending and dividends at current oil prices.
It is only able to guide to being able to balance the books by the end of the year if prices improve slightly on their current levels to $60 per barrel.
This partly reflects an upwards adjustment to 2017 capex to the upper end of the previous $15bn to $17bn range at $16bn to $17bn.
It also shows the pressure on cash flow from accelerated compensation payments linked to the 2010 Gulf of Mexico oil spill, something we mentioned in our preview of the results here.
DIVIDEND DOUBT
The all-important dividend is unchanged at 10 cents per share for the quarter and based on consensus forecasts BP is on a prospective dividend yield of 7%. This reflects valid market concerns about its ability to sustain the payout if oil prices take another tumble.
