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Market Update

Earnings on Tap: BP

As the Macondo episode and the buying into Rosneft gets concluded, the BP that emerges will still possess a lot of attractive oil and gas assets.


U.K.-based oil giant  BP (BP) will report first-quarter numbers Tuesday morning ahead of the bell. The consensus estimate calls for earnings of $1.05 per share compared with $1.84 per diluted share reported in the year-ago quarter.

Lower production of oil and natural gas pressurized  the energy giant's profitability during the fourth quarter as it undertook asset sales to pay billions in criminal charges to the U.S. government over the Macondo oil spill. Net income, adjusted for nonoperating items and accounting elements, was reported at $3.984 billion.

Earlier in March this year, the company said it would soon begin an $8 billion share-repurchase program with the proceeds it received from divesting TNK-BP. The company's shares jumped more than 2% on heels of the news. Morningstar analyst Stephen Simko explains the positive reaction is in large part because it hints that the increasing cost estimates from Macondo-related business claims won't undo BP's previously stated plans to return a lot of cash to shareholders in the coming years via repurchases and increased dividends.

On a year-to-date basis, the stock is up 1.3%, and is presently trading near Simko's fair value estimate.

When the dust settles from Macondo and buying into Rosneft, the BP that emerges will still possess a lot of attractive oil and gas assets. BP has been wounded, but it still will be one of the titans of the Western oil industry, adds Simko.

Gazala Parveen does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.