BP tops Q3 estimates, aims $7 billion in cost savings

November 21, 2016
BP tops Q3 estimates, aims $7 billion in cost savings August 9, 2018 Clive Nelson https://plus.google.com/110107075468979879828/

BPOn November 1, the oil and gas company BP Plc (NYSE: BP) reported fiscal 2016 third-quarter results that beat analysts’ estimates by a wide margin. The company had reported a loss in the previous three quarters.

Ironically, the stock lost about 10% in the past two weeks. Having anticipated the downfall, we had recommended purchasing a one touch put option on October 5, with a target price of more than $33. The stock, which was trading near $36 when we gave the recommendation, achieved the target in three weeks’ time.

Now, the probable Fed rate hike in December threatens to increase the operating expenses of the oil company. Still, we believe that it is the right time to buy the stock due to the reasons provided below.

The London-based company reported a $9 billion drop in the third-quarter revenue to $48.04 billion, from $57.30 billion in the third-quarter of 2015. For the quarter ended September, the replacement cost profit rose to $1.66 billion or $8.82 per share, from $1.234 billion or $6.63 per share in the corresponding period last year.

BP

Excluding impact of non-operating items, among others, the underlying replacement cost profit in the Q3 2016 almost halved to $933 million or $4.96 per share, from $1.82 billion or $9.92 per share in the Q3 2015.

During the quarter, the company met the production estimates of 2.11 million barrels of oil equivalent per day.

Cost reduction program was the primary reason for the company to return to profit, amid weak oil price and poor refining margins. The company announced that it now anticipates the capital expenditure to be $16 billion, instead of the $17 billion to $19 billion guidance range provided earlier.

Excluding capital expenditures, BP anticipates the overall costs to decline by $7 billion, compared to 2014. BP stated that it would use the saved money to invest in new barrels and meet dividend obligations. BP is expected to maintain its quarterly dividend payout of $0.10 per share.

Finally, the OPEC body announced last week that it is hopeful of finalizing a rate cut by the end of November. The analysts believe that the crude price would get a boost if the OPEC is able to materialize a production cut deal and also convince the non-OPEC members, mainly Russia, to agree on limiting its output. An increase in the oil price would correspondingly result in an increase in the top line and bottom line of BP.

The stock has once again found support at 33.50 levels. On the upside, the major resistance exists at 36. The stochastic oscillator is currently in the oversold region. So, a bounce back can be expected in the share price.

BP Stock Price: November 21st 2016

BP Stock Price: November 21st 2016

To capitalize on the opportunity, a binary trader can purchase a one touch call option. With a target level of $35.50 and an expiry date in the third week of December, a trader can count on his chances of realizing gains of up to 92% in a short span of time.

About the Author

Clive Nelson

Clive Nelson Author

Hi, my name is Clive Nelson and welcome to Traders Bible. Just to tell you bit about myself…I have been trading FX and binary options for the best part of 10 years now. After graduating with honours in economics, I began working for an investment bank in New York as an assistant trader before working my way up. After a few years, I went on to work as a broker in London, England and then eventually came back to the U.S to work in a hedge fund, where I manage $800 million of my clients’ investments. There have been times over the course of my career where I’ve had to take a hit, but I’ve accepted that losing is part of the game, it’s a learning curve. I’ve learnt from my mistakes and you don’t have to make the same errors I did. A lot of my education came from when I was a broker and this is why I’m here to tell you that Traders’ Bible offers you the foundations of how to become a great trader.


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