Earnings Cheat Sheet: BP Profitable this Quarter but Reports YTD Loss of $9B

BP reported a $1.8B profit for the third quarter with operating performance much improved from a loss in the prior quarter. The numbers exclude non recurring charges, however, and the company expects charges from the Gulf Oil Spill to total $39.9B.

Including pre-tax charges related to the Gulf spill, the company reported a loss of over $9B for the first nine months of 2010 compared to a profit of over $12B for the first nine months of 2009. This translates to a loss of almost $51 per share for the nine-month period.

BP attributed its improved operating performance to a more favorable price environment and lower depreciation, but keep in mind that neither one of these factors reflects operating or management improvements. After the spill, some sources floated reports that BP over-insured the well and made billions on the incident.

The stock rose over 1 percent in early morning trading following the news.

Here is your Earnings Cheat Sheet for BP:

Third-Quarter Earnings: $0.34 per share excluding nonrecurring items, on income of $1.8 billion

Revenues: $70.6B (up 6.6 percent yoy) from $66B in the 2009 quarter, but below second quarter figure of $73.7B

Actual vs. Expected: Beat expectations of $0.24 per share and $0.10 higher than the year-ago period

Notable Items:

The company had an unusually low effective tax rate of 16 percent for the quarter due to the spill, which boosted profit.

The company continues to divest about $30B in assets.

Amazingly, the company shows an increase on the balance sheet for “goodwill” over the prior year.

Risks and uncertainties surrounding potential legal proceedings could be significant.

Key Quotes: Here’s a teaser from the press release (the company canceled its dividend schedule after the spill)–

“The company described its improving financial condition and the strength of disposal proceeds as “encouraging” and reaffirmed the Board’s intention to review future dividends with the full-year results in early 2011.”

Also worth noting (but reported earlier):

“On 1 October 2010, Robert Dudley became group chief executive, succeeding Tony Hayward who stepped down from the post by mutual agreement with the BP board.”

Competitors: Petrochina (PTR), China Petro and Chemical (SNP), Chevron (CVX), Exxon (XOM)

Technicals: The stock has risen about 55 percent since the sell-off low of $26.75 after the spill but no longer looks attractive (receiving 5 downgrades from analysts since the spill) and is trading in a channel on low volume. This earnings report isn’t likely to move the needle much. The technicals give little indication of up or down momentum, and with volume at a near standstill, it would be wise to until the picture comes more into focus before making a move.

BP Plc (NYSE: BP)

Disclosure: No positions

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