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BP plc (ADR) (BP), Exxon Mobil Corporation (XOM): A Look into British Petroleum’s Future

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BP plc (ADR) (NYSE:BP) is now selling most of its assets in order to cover its liabilities from the Mexican oil spill. Fuel trading helped the company increase its downstream profits while the sale of its TNK-BP unit boosted its cash holdings and the bottom line. In order to increase exploration, the company is planning to drill new wells this year. This report takes an in-depth look at the company’s fundamentals and its future prospects.

BP plc (ADR) (NYSE:BP)

Company description

BP plc (ADR) (NYSE:BP) is a multinational oil and gas company with its headquarters based in London, England. It is Europe’s second largest oil company and it operates in all the segments of the oil and gas industry including exploration and production (upstream), refining and marketing (midstream) and transportation and sales (downstream).

Fundamentals

In the first quarter of 2013, BP plc (ADR) (NYSE:BP) reported a net income of $4.2 billion, in comparison to $4.7 billion for the same quarter in 2012. When a gain of $12.5 billion related to the sale of half of its TNK-BP unit in Russia was included, the company made a $16.9 billion profit in the first quarter of 2013. The upstream segment reported a profit before interest and tax (PBIT) of $5.7 billion, down from $6.3 billion year-over-year, while the downstream reported a PBIT of $1.64 billion as compared to $0.9 billion a year ago. The company announced a dividend of $0.09 per share for the first quarter of 2013 that was expected to be paid in June.

Looking into the future

BP plc (ADR) (NYSE:BP) warns that its production for the second quarter will likely be lower than that of the first quarter of 2013 due to the sale of its assets. It also expects that cost will be higher in the second quarter as compared to the first quarter due to seasonal turnout activity. A major cash flow will come after the completion of an upgrade to its US refinery, and this is expected to enhance it’s downstream business. In January, the company announced new oil production from the Valhall field in the southern part of the Norwegian North Sea. It expects that the production from Valhall will continue to grow in the second half of 2013.

Looking at its exploration segment, BP plc (ADR) (NYSE:BP) plans to drill 15 to 25 wells by the end of 2013. Due to the sale of half of its stake in TNK-BP Russian, the company’s total production was 5% lower than it was in the first quarter of 2012.

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