BP (LSE: BP) (NYSE: BP.US) shareholders could do with a bit more good news, and they did get some on 16 January when the latest court ruling in the US potentially lowered its eventual oil-spill fine by around $4bn.
But will there be any cheer when we get BPs 2014 full-year results, due on 3 February?
Oil sector results are obviously overshadowed by the low price of oil right now, with Brent Crude having remained steady at around $48 a barrel for the past two weeks after a precipitous slide. And BP boss Bob Dudley has told the BBC that he expects the price to remain low for certainly a year, I think probably two and maybe three years.
The problem is theres a glut of oil on the market these days, with supply running ahead of demand and its widely acknowledged that thats due, at least in part, to Middle Eastern producers opening up the taps to flood the market and see off the fledgling oil shale industry.
But is that so bad for BP? Well, analysts forecasts for BPs earnings have been scaled back significantly since the oil price has started to drop, and while it is unlikely to make much difference to 2014 results, weve seen earnings per share (EPS) forecasts for 2015 slashed by a third in the past three months, lifting BPs forward P/E multiple to 13.7.
But thats still a shade short of the FTSE 100 long-term average of around 14, and its very much geared towards the short term. In the long term, I think BP is looking good. The company has already announced job cuts in the North Sea along with reducing its capital expenditure on new exploration and development, and well surely be hearing more abut that when we get next weeks results.
Average per-barrel production costs have been estimated at around $65, which makes much of the worlds production unprofitable at todays retail prices. So over the next few years its all going to be about competitiveness, and BPs wide range of assets with various per-barrel production costs mean it has greater ability than many to last out a period of cheap oil while others may go to the wall.
So when we get BPs results next week and read its outlook thoughts, I expect the focus will be on cost-cutting in the short term but with a view to profiting in the long term from the war of attrition that is currently being waged.
Should you buy BP shares in these fraught times? I reckon you could do worse.
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