Some obvious issues of commodity price trends, profitability and asset sales commentary will be crucial reading in BP’s trading statement, which comes out on the day that Bernard Looney takes over as chief executive from Bob Dudley.
Prior warnings mean BP investors are likely to be braced for weak sentiments, with recent results out of rival Shell not providing much comfort.
“Shell’s profits undershot analysts’ forecasts in the fourth quarter and consensus earnings forecasts at BP have slipped relentlessly lower as commodity prices have weakened,” said Russ Mould at AJ Bell.
Others are looking at the potential for write-offs – particularly for the shale assets picked up from BHP – along with a cautioning around broader crude market uncertainty.
After a surge in oil price volatility in recent weeks, as heightened tensions between the US and Iran subsequently tailed off sharply amid coronavirus fears, there will be many investors looking for some words of reassurance.
Others might be seeking an update on renewables strategy from new man Looney, with BP having so far invested in biofuels, biopower, solar energy and wind energy but being pushed to do lots more.
Analysts at Berenberg last month downgraded their rating on BP, suggesting the stock “will be in a holding pattern” through the first half ahead of the receipt of cash proceeds from disposals and the new strategy outlook from Looney.
“In the near term, the focus remains on reducing gearing, with increased shareholder payouts likely having to wait until H2 when debt has decreased.”
Micro review in focus
There is a “potential for disposals to be announced”, analysts at UBS suggested, or maybe “incremental investments to maintain the relevancy and competitiveness of its products” in either its testing or security arms, perhaps.
Micro Focus, which incidentally was the single London-listed stock that made it onto UBS's top tips list of the cheapest stocks for 2020, last summer said it would accelerate the business review to focus on “what in addition to execution improvements are required to optimise the value of our broad portfolio of products”.
In November it revealed that net debt was around US$4.3bn at a leverage multiple of approximately 3.2 times underling profits (EBITDA) for the period to the end of last October.
Cash flow levels will therefore be “important” said UBS, “and so the impact of any investments on margins, the status of the HPE integration exercise, sales efficacy and the outlook for revenues in 2020 are all factors that investors will focus on”.
In 2020 the analysts are looking for a 5% sales decline to US$3,163m and EBITDA of US$1,355m.
Tuesday February 4:
Economic data: UK construction PMI, US factory orders