BP: Is It The Right time to Buy Now

If in the early weeks of November 2017, you were wondering if it was the right time to buy BP shares then you would have had a lot of information available to help you make your final decision. Most obviously there was a set of Q3 figures, released at the end of the previous month that seemed to show that the oil giant was in rude financial health. The figures for BP and its third quarter were described by most observers as being ‘solid’, but this is often the best case for shares in such companies, as their profitability is ultimately and intimately related to the price of oil itself.

It may be worth our while to briefly rehearse the details of the Q3 figures for BP. The company’s preferred measure of profit is the underlying replacement cost profit, and this showed very healthy in the third quarter reports, coming in at US$1.9 billion, a sizeable increase from the Q2 figure of US$684 million; it was more than twice the figure for the same quarter of 2016 (at US$933 million) and perhaps most importantly, for those who are wondering whether now is the right time to buy BP, it was significantly higher than the analysts’ prediction of US$1.58 billion.

If instead of looking at the metric preferred by BP and instead focus on the more common way of measuring profit, we again the same story; earnings of US$1.77 billion, an improvement of over US$150 million for the same period in the previous year. The Q3 figures showed that BP had, already in the year 2017, achieved an overall profit of £3.36 billion; when it is recalled that the first nine months of 2016 showed a loss of US$382 million, the size of the upturn for the oil giant can be fully appreciated.

Perhaps the most publicised and certainly the most controversial event in the recent history of BP was the notorious Deepwater Horizon disaster, and the continuing payments made by BP for the clean-up operation in the Gulf of Mexico have been adversely impacting on the company’s cash flow in recent times. However, taking these payments into account, the figure of US$6 billion for BP again compares favourably with US$5.2 billion for Q3 of 2016. The figure for the first three quarters of 2017 stood at US$13 billion, compared to US$8.3 billion for the same period in 2016.

BP still has its problems of course, including a substantial amount of debt, but even this seems likely to improve in the near future, as the clean-up payments from the Gulf of Mexico begin to taper off. The management at the company seems, predictably, to be satisfied with the last set of figures, but promise that there will be no complacency in the future. In many ways, the oil giant has been recovering its good name after the disaster of the Deepwater Horizon. With its recent solid performance, BP looks like a possible investment as part of a well-balanced portfolio.

Spread betting, CFD trading and Forex are leveraged. This means they can result in losses exceeding your original deposit. Ensure you understand the risks, seek independent financial advice if necessary.

The value of shares and the income from them may go down as well as up. Nothing on this website constitutes a solicitation or recommendation to enter into any security or investment.

Leave a Reply

Your email address will not be published. Required fields are marked *

CommentLuv badge