BP saw underlying profits reach $8.45 billion (£6.9 billion), a figure which is more than triple the sum it made at the same time last year and its second highest figure ever.

In a statement, BP chief executive Bernard Looney said: "Today's results show that BP continues to perform while transforming."

"Our people have continued to work hard throughout the quarter helping to solve the energy trilemma – secure, affordable and lower carbon energy."

"We do this by providing the oil and gas the world needs today – while at the same time, investing to accelerate the energy transition."

The news of BP’s record-high profits comes as energy consultant Cornwall Insight warned regular gas and electricity bills in England, Wales and Scotland could reach £3,615 in January.

Cornwall Insight’s principal consultant, Craig Lowrey, commented, “While the rise in forecasts for October and January is a pressing concern, it is not only the level – but the duration – of the rises that makes these new forecasts so devastating.”

“Given the current level of the wholesale price, this level of household energy bills currently shows little sign of abating into 2024.”

[ymal]

David Morrison, Senior Market Analyst at Trade Nation, and Michael Kamerman, CEO of Skilling, share their opinions on what stock you should sell this week, and what stock you should buy.

Buy: BP

As Russian hostilities in Ukraine continue to ratchet up, and after the West imposed its toughest set of sanctions on Russia, BP announced it would dump its 20% stake in Rosneft, estimated to be worth £25 billion. The news led to a delayed opening last Monday and BP’s stock price fell 7%. This took the stock down to 350 pence. BP began the year at 330 pence and then rallied to 418 by 11th Feb. It has sold off ever since until hitting 350 pence on Monday. It subsequently jumped to 375 pence, having recovered all losses after the Rosneft news. But the stock slid below 350 on Friday 4th March following news that Russian forces had attacked Ukraine’s largest nuclear power plant. BP is trading a long way below the 720 pence high from 2006, but it’s comfortably above its October 2020 low when it fell below 200 pence. BP is undeniably a volatile stock. Fortunately, investors have received decent dividends over time, as a reward for their loyalty.

Does the current sell-off open an opportunity for dip buyers? Quite possibly. Looking at the chart, since the October 2020 low BP has trended upwards, putting in a succession of higher highs and lower lows. This is bullish. On top of this, WTI crude oil has just traded at levels last seen eleven years ago, and the latest OPEC+ meeting showed that members were in no mood to raise output above their current meagre supply increase. This should help with BP’s profitability. BP is a good dividend payer and is open to buybacks. In addition, the divestment of BP’s Rosneft stake could, according to a report from Bloomberg, boost the company’s environmental credentials, thereby making it more acceptable to the ESG crowd.

Sell: Big Retailers Like Macy’s

Department store group Macy’s, whose brands include Bloomingdale’s and beauty outlet Bluemercury, could struggle if the current economic environment persists. Inflation hasn’t proved to be transitory and seems likely to rise further given the recent jump in energy and food prices. At the same time, we could be looking at a period of falling growth. If so, then we should expect consumers to adapt to conditions and look at where they can make quick and easy savings. Maybe cut back on streaming subscription services for instance. But which ones? Also, the monthly subscriptions aren’t too onerous if you’re working. But what about jewellery, clothing, kitchenware, bedding? US consumers may decide to stop purchasing luxury items  while deciding they can live a bit longer before replacing other household items. I think this could be a problem for Macy’s. In mitigation, last month Macy’s released a strong set of quarterly results. The group also offered positive forward guidance for 2022, citing fresh initiatives such as expanding its digital business, as well as private brands and small, off-mall stores. These, along with the opening of the global economy post-Covid 19, should all be positives for the group. But gains in the stock price will depend on the success of the fresh initiatives, against what could be challenging economic conditions for the year ahead.

Macy’s has also rejected calls from activist investor Jana Partners to spin off its e-commerce operations. Jana Partners calculate that a split could double the group’s valuation. But Macy’s insists it would cost too much to make the change. No doubt activists will continue to circle, but investors will have to do their own due diligence to work out how this could affect the share price going forward.

- David Morrison, Senior Market Analyst at Trade Nation

Buy: NVDIA

NVDIA has some of the most sought-after gaming graphics processing units (GPUs) globally and is outperforming many of its competitors in the industry. Despite recent blips for the stock including a cyberattack, NVDIA has reported its best quarter in ten years. With the added potential of the metaverse, NVDA stock is an exciting option for investors. 

Jaguar Land Rover has also just entered a partnership with NVIDIA to develop their upcoming vehicles on the platform. With the highly anticipated RTX 4000 GPU rumoured to be released later this year, NVDA stock is likely to gain momentum. The company is also expected to offer a 150% performance increase with a forecasted revenue of $8.11 billion for Q1 2023.

However, investors need to be mindful of market volatility. After prolonged global chip shortages, it could take months for the supply of Nvidia GPUs to catch up with demand. As a result, investing in this stock can cause big losses as NVDA tumbles from recent highs and may take some time to be actionable once again.  Despite this, NVIDIA is still a dominant force in the chip space. By focusing on gaming, AI and the emerging metaverse, the company is expanding its business offerings exponentially.

Whilst the sluggish price momentum due to political triggers shouldn’t deter investors completely, as with any investment, investors need to understand what they’re investing in and make a rational, emotionally intelligent decision. 

- Michael Kamerman, CEO of Skilling

Warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 89% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money. Not investment advice. Past performance is not indicative of future results.

Disclaimer: The information contained within this article is for educational and entertainment purposes ONLY. The commentary provided is the opinion of the author and should NOT be considered as personalised advice or recommendation. The information provided in this article should NOT be a person’s sole basis for an investment decision. All investments are made at the reader’s own risk. 

BP saw an underlying profit of $4.1 billion in the final quarter of 2021. While in 2020 the oil giant saw a loss of $5.7 billion, in 2021, BP made a profit of $12.8 billion overall as global energy prices rocketed. 

Announcing the company’s latest results, BP chief executive Bernard Looney said, “2021 shows BP doing what we said we would — performing while transforming. We've strengthened the balance sheet and grown returns. And we're investing for the future. We've made strong progress in our transformation to an integrated energy company.”

However, the news of BP’s bumper profits will likely prompt a renewed wave of pressure for a windfall tax on fossil fuel companies to fund extra support for households who have been heavily impacted by the steep rise in energy bills. The UK Labour party has said it is “only fair and right” that energy firms making higher profits should pay higher rates of tax. 

Last week, rival oil giant Shell reported bumper profits of $19 billion on the same day that Ofgem announced UK households could expect a 54% increase in their domestic energy bills from April. 

According to Refinitiv, BP posted an underlying replacement cost profit of $3.3 billion for the third quarter, a figure which surpasses analyst predictions. The $3.3 billion figure compares to a $2.8 billion net profit in the previous quarter and $100 million for the same period last year when the pandemic saw oil prices collapse. In 2021, Brent crude prices have increased by approximately 60% so far. 

In the company’s earnings report, CEO Bernard Looney said, “Rising commodity prices certainly helped, but I am most pleased that quarter by quarter, we’re doing what we said we would - delivering significant cash to strengthen our finances, grow distributions to shareholders and invest in our strategic transformation.”

However, BP also reported a headline loss of $2.5 billion for the third quarter, “driven by significant adverse fair value accounting effects.” Consequently, BP took a $6.1 billion hit which it attributed to the “exceptional increase in forward gas prices towards the end of the quarter.”

BP has said it will buy back $1.4 billion of its shares in the third quarter due to a $2.4 billion cash surplus from the first half of the year. BP has also upped its dividend by 4% to 5.46 cents per share. In the second quarter of 2020, the oil giant halved its dividend to 5.25 cents per share. 

With the oil price estimated to average out at $60 per barrel, the company also expects buybacks of around $1 billion per quarter and an annual dividend increase of 4% through to 2025. BP posted a full-year underlying replacement cost profit of $2.8 billion, a substantial figure compared to the loss of $6.7 billion over the same period last year. In the first quarter of 2021, BP reported a net profit of $2.6 billion. In a poll conducted by Refinitiv, analysts predicted a second-quarter net profit of $2.06 billion.

The oil giant’s results come as part of a wider trend across the oil and gas industry as companies seek to reassure investors that they have stabilised themselves amid the ongoing covid-19 pandemic.

In a webcast to employees on Monday, BP chief executive Bernard Looney announced that 10,000 jobs will be cut due to the effect of COVID-19 on oil prices.

“The oil price has plunged well below the level we need to turn a profit. We are spending much, much more than we make,” he said.

Looney said that BP’s senior roles would “bear the biggest impacts”, with a new company structure seeing the number of senior-level jobs halved and group leaders cut by a third. “The majority of people affected will be in office-based jobs. We are protecting the frontline of the company and, as always, prioritising safe and reliable operations,” he continued.

This new round of layoffs, most of which will be resolved by the end of the year, marks the end of BP’s three-month redundancy freeze that has commenced since March.

In addition to reducing BP’s capital expenditure by $3 billion and operating expenditure by $2.5 billion in 2020, Looney also suggested that the company will soon be refocusing its efforts to transition away from fossil fuels, and that the COVID-19 pandemic may accelerate the process.

“To me, the broader economic picture and our own financial position just reaffirm the need to reinvent BP,” he said. “While the external environment is driving us to move faster — and perhaps go deeper at this stage than we originally intended — the direction of travel remains the same.”

Since his appointment to CEO in February, Looney has already pledged to transform BP into a carbon-neutral company by 2050.

BP's business activities in the US helped generate close to $143 billion (€121 billion) in economic impact in 2013 and currently support nearly 220,000 American jobs, according to the company's recent US Economic Impact Report 2014.

Released early January, BP's new report provides a detailed, state-by-state look at the breadth and impact of the company's activities in America. Since 2009, BP has invested nearly $50 billion (€42 billion), making it America's largest energy investor. In 2013 alone, BP spent $22 billion (€18.6 billion) with vendors across the country on products and services, ranging from offshore drilling rigs to gasoline-producing equipment for its refineries.

“No energy company has invested more in the US over the past five years than BP,” said John Mingé, BP America Chairman and President. “Our investments not only provide the energy to power the nation, but they also support hundreds of thousands of jobs that fuel the economy.”

BP's business investments in the US include oil and natural gas exploration and production, fuel and chemical refining, lubricants, shipping, trading, renewable energy production and technology research and development. The US also is home to a number of operations that serve BP's global businesses, such as the Centre for High-Performance Computing in Houston, which houses the world's largest supercomputer for commercial research. Nearly 40% of BP's publicly traded shares are also held in the US.