Can BP Do Better?

It's a good thing that a booming market can cover up a lot of flaws at an oil company. Were that not the case, BP (NYSE: BP  ) might be in some real trouble right now. In roughly one year, this company has seen a major refinery accident, a pipeline rupture, a trading scandal, and ongoing delays in bringing the Thunder Horse platform back on line.

Yet profits continue to roll in to the company's coffers. Reported revenue rose 24% this quarter as significantly higher price realizations (up more than 23%) helped to offset a greater-than-2% decline in energy production. Assessing profitability is a bit hairier. Reported profits (on a replacement cost basis) climbed 23%, but there was a large charge in the year-ago period. Take that out, and the growth rate falls to about 5%.

Performance was likewise mixed within the individual business segments. E&P profits were up about 12% on an adjusted basis, but refinery and marketing profits rose about 20% on a similar basis, even though throughput and sales were both down (10% and 6%, respectively). As you might imagine, margins saved the day there -- overall refining margins were up almost 50%.

If this is the best BP can do, I can't see any good reason why investors should opt for this company over ExxonMobil (NYSE: XOM  ) , Chevron (NYSE: CVX  ) , or ConocoPhillips (NYSE: COP  ) , to say nothing of slightly more exotic ideas like Eni (NYSE: E  ) .

I would argue, though, that this isn't the best BP can do. For starters, the company has historically posted low finding costs, and it has some pretty big projects in the near-term pipeline that should boost production. What's more, the recent accidents may be suggestive of sloppy or careless practices, but a thorough review and recommitment to best practices should avoid them in the future.

I do admit to being puzzled, though, by some of the company's priorities. It's willing to make a splash in alternative markets like solar power, where it will compete with large companies like Sharp and small companies like SuntechPower (NYSE: STP  ) , but it seems to have no interest in the Canadian oil sands projects. I'll grant that oil sands exploitation is more like mining in some respects, but it's a heckuva lot closer to its core competencies than solar power.

In any case, if you think BP has learned its lessons and that management is getting back on the right track, the shares don't look overpriced. If you're not quite as confident, though, there's a wealth of other options worth exploring.

For more energetic Foolishness:

SuntechPower is aMotley Fool Rule Breakersrecommendation. Find more cutting-edge technology stocks from David Gardner and his team with a free 30-day trial.

Fool contributor Stephen Simpson has no financial interest in any stocks mentioned (that means he's neither long nor short the shares).

Read/Post Comments (0) | Recommend This Article (2)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Compare Brokers

Fool Disclosure

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 514865, ~/Articles/ArticleHandler.aspx, 10/25/2016 10:54:09 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Today's Market

updated 1 hour ago Sponsored by:
DOW 18,169.27 -53.76 -0.30%
S&P 500 2,143.16 -8.17 -0.38%
NASD 5,283.40 -26.43 -0.50%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

10/25/2016 4:00 PM
BP $36.04 Up +0.17 +0.47%
BP CAPS Rating: ****
COP $41.81 Down -0.43 -1.02%
ConocoPhillips CAPS Rating: ****
CVX $100.77 Up +0.11 +0.11%
Chevron CAPS Rating: ****
E $29.68 Down -0.22 -0.74%
Eni CAPS Rating: ***
STPFQ $0.00 Down +0.00 +0.00%
Suntech Power Hold… CAPS Rating: *
XOM $86.72 Down -0.19 -0.22%
ExxonMobil CAPS Rating: ****