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1-Star Price

PREMIUM

5-Star Price

PREMIUM

Economic Moat

PREMIUM

Capital Allocation

PREMIUM

BP Hits Debt Target During Q1, Clearing Way for Repurchases to Commence

Allen Good, CFA Sector Strategist

Analyst Note

| Allen Good, CFA |

BP reported a strong rebound in earnings during the first quarter, with adjusted earnings surging to $2.6 billion from $791 million a year ago. Importantly, BP surpassed its $35 billion net debt target during the quarter, well ahead of its year-end goal. This allows for the start of the variable repurchase element of its shareholder distribution plan, beginning with a $500 million repurchase in the second quarter to offset dilution from employee stock awards. With the exception of the second quarter, which will be negatively affected by the Gulf of Mexico spill payment, management expects to generate surplus cash for the remainder of the year at oil prices above $45 a barrel. It will refrain from issuing repurchase guidance until it reports second-quarter results. Regardless, the debt reduction and strong earnings show BP is recovering well from a difficult 2020. We expect further progress throughout the year as BP benefits from an economic recovery. However, its long-term outlook relies less on commodity prices and more on the success of its transition away from its legacy oil and gas business. Our no-moat rating and fair value estimate are unchanged.

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Company Profile

Business Description

BP is an integrated oil and gas company that explores for, produces, and refines oil around the world. In 2019, it produced 2.1 million barrels of liquids and 7.9 billion cubic feet of natural gas per day, including volumes from its 20% ownership interest in Rosneft. At year-end 2020, reserves stood at 18.0 billion barrels of oil equivalent, 59% of which are liquids. The company operates refineries with a capacity of 1.9 million barrels of oil per day.

Contact
1 St James's Square
London, SW1Y 4PD, United Kingdom
T +44 2074964000
Sector Energy
Industry Oil & Gas Integrated
Most Recent Earnings Mar 31, 2021
Fiscal Year End Dec 31, 2021
Stock Type
Employees 63,827

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