“Indiscriminate selling” was the reason put forward by one analyst to explain BP PLC’s (LON:BP.) share price drop following the release of the oil major’s fourth quarter results on Tuesday.
The London-listed oiler was down 3.85p or 0.8% this afternoon, in the wake of a global equities sell-off, which saw the Dow Jones give up more than a thousand points (marking the biggest ever single session loss in Wall Street history).
READ: BP boasts “strong delivery and growth” but latest US$1.7bn Gulf of Mexico charge dents profits
BP’s results were not without negativity, as another US$1.7bn was added to costs of the 2010 Gulf of Mexico oil spill, nonetheless, it was a results statement that boasted of more recent operational successes.
Notably, upstream production was up materially and thus, with crude prices now steady around the US$70 a barrel level, the group’s underlying profit and cash generation were also looking well against last year’s comparatives.
Rising underlying profit and operating cash flow
Underlying profit was reported at US$2.1bn, up from US$1.86bn in the preceding period and from US$400mln in the comparative period of 2016. For the full 12 months, BP made a US$6.1bn underlying profit up from US$2.58bn in the year before.
Operating cashflow amounted to $6.2bn and $24.1bn for the fourth quarter and the full year respectively.
BP said upstream production increased 12%, helped by the delivery of seven new projects. Output tallied 3.6mln barrels oil equivalent per day, including contributions for the company’s stake in Rosneft. It marked the best year for production since 2010. It discovered some 1bn barrels worth of new discoveries as the exploration division saw successes.
"2017 was one of the strongest years in BP's recent history,” said chief executive Bob Dudley.
The BP boss added: “We enter the second year of our five-year plan with real momentum, increasingly confident that we can continue to deliver growth across our business, improving cash flows and returns for shareholders out to 2021 and beyond.”
The oil major maintained its quarterly dividend, at 10 cents per share, and confirmed that it spent US$343mln on share buybacks which it said offset all the dilution created by the third quarter’s scrip dividends.
Sturdy performance eclipsed by stock market weakness
Richard Hunter, head of markets at Interactive Investor, in a note said the wider stock market weakness had “eclipsed” BP’s sturdy quarterly performance.
“The company’s ability to generate cash remains prodigious, underpinning a supportive share buyback programme and a dividend yield of 6.2%, which has remained a stable source of income for investors over recent, leaner years.
“Production has also risen strongly, with the contributions from both upstream and downstream operations adding to BP’s general financial strength.
“Meanwhile, exploration was as strong as has been seen for over a decade, whilst the company remains mindful and in position to participate in the changing energy landscape.”
READ: BP unveils new North Sea oil discoveries
Hunter added: “For a company of BP’s size, there will be a number of areas which require ongoing attention. Even now, there are still ripples coming through from the Gulf of Mexico spill, dampening the fourth quarter performance, whilst the net debt figure remains high, even if leverage is moving in the right direction.
“In addition, net disposals were slightly shy of BP’s earlier guidance, although this slack has been taken up elsewhere.”
Elsewhere, London Capital Group’s head of research Jasper Lawler said that profit taking has been a “key factor” in the morning’s share dealing and that BP is also impacted by a lower daily oil price (Brent is down 0.65% today at US$67.19).
AJ Bell investment director Russ Mould, meanwhile, pointed to the “material improvement” in cash flow and highlighted that this has significant implications for “sustainability of BP’s prized dividend payments.”
“It was also interesting to note that the firm delivered ‘very strong’ earnings in its downstream or refining operations which set it apart from rivals like Royal Dutch Shell and ExxonMobil which saw their downstream arms underperform in the final three months of last year,” Mould added.
Plainly, it has been a volatile morning for stocks generally. It is likely that many investors may reflect on BP’s apparent sturdiness at some later point, once the market has found a calmer mood.