Garnry: BP results and why my energy picks are beating key index
Saxo Banks' Head of Equity Strategy Peter Garnry analyses BP's latest full year results which reveal a Q4 dent caused by low oil prices and the firm's exposure to Russia. Peter also explains why his preferred pick of energy stocks is out-performing a key market index.
BP exceeded Q4 earnings estimates, reporting USD 2.24 billion in adjusted profit versus estimates of USD 1.63 billion. Rosneft, a Russian oil company, contributed to the UK-based oil majors’ quarterly gains. BP owns a 20 percent stake in Rosneft, which surprisingly reported USD 470 million after adjusting its accounting practices. Despite the better-than-expected news, profits have fallen 20 percent from a year earlier for BP.
With oil prices in the USD 50 range, BP’s chief Bob Dudley said that “We have now entered a new and challenging phase of low oil prices through the near and medium term.” The new standard in the price of oil has prompted BP to cut its capital expenditure budget by USD 4-6 billion. Although the price of oil has fallen around 50 percent since June, BP’s stock price is only down 16%. Diversification has helped oil majors stave off steeper declines. Peter Garnry, Head of Equities Strategy at Saxo Bank, says that the complexity of the company’s operations has helped BP, yet it is still evaluated at a 15% discount to its peers. The discount can be explained by the company’s exposure to uncertain markets such as Russia. Overall, in the long-term these complex businesses appear to offer an attractive investment opportunity for those interested in taking advantage of low oil prices.
In January, Peter published his list of preferred basket of drillers and equipment and services energy stocks. The energy stocks selected in this portfolio have risen 6 percent since January, compared to 2 percent growth in the overall global equity market.
