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BP Update

27 October 2020 by jbchevrel

BP p.l.c is an oil and petrochemicals company. They do oil&gas E&P, refining, marketing and trading. They also do chemicals (terephthalic acid, acetic acid, acrylonitrile, ethylene, polyethylene) and increasingly they do renewables (solar). Today BP CDS was stable at 100bp, after reporting Q3 numbers. In Q3, BP returned into positive profit territory as energy recovered, but the outlook remains grim. Underlying profit was $86m in Q3 vs -$120m forecast, $2.3b in Q319.In Q3, there was no asset write-down, most of the shock had been in Q2. Margins in refining remain challenged by stockpiles and depressed demand for jet fuel. Net Debt fell to $40.4b in Q3 from $40.9b in Q2. BP expects Net Debt to fall further this year as proceeds for its petrochemicals deal to INEGRP are cashed in ($5b by year end). In total, BP has already completed or agreed transactions for c50% its target of $25b by 2025. That reinforces the credit story and enables BP to remain committed to their dividend. BP shareholder lost -58% YTD. The stock is at the lows, -2% today, valuing the company just below £40b. Today, crude prices strongly rebounded thanks to 1/ weakening dollar 2/ Tropical Storm Zeta threatens US Gulf output. WTI was up ~+3% at some point. Zeta has already taken 16% of US Gulf output offline. Zeta is now seemingly heading toward Louisiana, while most facilities are more West. That’s for the upside risk. Reversely, falling jet fuel & gasoline demand - as Europe restrictions increase - are the main downside risk.