Third-quarter revenue fell 2.8% to $93.9bn, beating City estimates thatwere calling for revenue of $93.4bn.Underlying replacement cost profit for the period, a figure thatincludes thereplacement cost of supplies, declined 18% to $3.0 billion, although once again this beat estimates. The City was expecting a profit of $2.9bn.
BPs production for the quarter, including the companys share of Rosnefts production, fell slightly to 3.15mbarrels of oil equivalent per day, down from 3.17mboe/d as reported during the third quarter of last year.
However, despite todays set of relatively upbeat results, therere plenty of reasons to continue to be sceptical about BPs outlook.
For example, the company still owns around 20% of Russian oil giant Rosneft, which has begun to feel the effect of tough sanctions placed on Russia, as a result of the countrys involvement in the Ukraine crisis. BP warned earlier this year thatinternational sanctions against Rosneft could have a material adverse impact on its Russian business.
Alongside its Russian troubles, a few weeks ago BP was also foundguilty of gross negligence and wilful misconduct in the 2010 Deepwater Horizon disaster, exposing the company to penalties of up to $18bn. Management noted within todays results that:
As at 30 September 2014, the cumulative charges to be paid from the Deepwater Horizon Oil Spill Trust fund reached $20 billion. Subsequent additional costs, over and above those provided within the $20 billion, will be charged to the income statement as they arise.
This implies that BP could be forced to take some hefty charges over the next few months, or even years, as additional claims from the spill emerge.
Whats more, like almost all of its peers, BP is trying to grapple thefalling oil price as global supply out paces demand.
Lots of risk
Todays results are a real reminder that while BP is a highly profitable company, the group is still facing many challenges.
Nevertheless, it seems as if the market has already priced in many of these risks as the companys current valuation is significantly below that of its peers. In particular, at present levels BP trades at a forward P/E of 9.5 and supports a dividend yield of 5.3%.
Further, barring any foreseen surprises, the City expects BPs earnings to rise 6% during 2015, which puts the company on a 2015 P/E of 8.9. City figures also suggest that the companys dividend yield will hit 5.8% by 2015.
In comparison, BPs peers in the oil & gas producers sector trade at a P/E of 12.4 and support a yield of 4.1%.
The bottom line
All in all, BPs third-quarter results showed that the company is still moving forward and is highly profitable. However, BPis still facing many challenges andthe companys lowvaluation reflectsthat.
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Rupert Hargreaves has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don’t all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.