BP Q4 preview: Where next for the BP share price?

Oil rig on an grey day
Josh Warner
By : ,  Market Analyst

When will BP release Q4 earnings?

BP will release fourth quarter earnings covering the final three months of 2021 on the morning of Tuesday February 8.

 

BP Q4 earnings preview

BP’s quarterly results come hot on the heels of its main rival in London, Shell, which has already posted impressive results for the period to give us an idea of what to expect.

Shell’s adjusted earnings jumped higher than expected to $6.4 billion (versus $6.3 billion forecast) from just $393 million the year before thanks to the surge in oil and gas prices as demand continues to rebound as the global economy reopens and supply remains tight. Just today we saw Brent rise to seven-year highs after surpassing the $92 per barrel mark, with WTI also following higher. Both measures look on course to book their seventh consecutive weekly gain.

That has given Shell the confidence to ramp-up distributions to shareholders. Having returned $3.5 billion to shareholders during 2021, it said it is now looking to return $3 billion to investors in the first half of 2022 – in addition to the $5.5 billion it is dishing out after selling-off its Permian assets in the US. It also said it was bumping-up its dividend by 4% to $0.25 in the first quarter of 2022.

In a similar fashion, analysts forecast BP will see underlying replacement cost profit – its headline measure - soar to $3.91 billion in the fourth quarter from just $115 million the year before as it too reaps the rewards of higher commodity prices.

Distributions will also be the main focus for BP investors.

BP has been returning uneven tranches of cash to shareholders depending on the amount of surplus cash on its books and said in its last update that it would conduct a $1.25 billion buyback before releasing its fourth quarter earnings. It has not provided any guidance on what to expect in the form of distributions going into 2022, but markets are expecting buybacks to accelerate, especially as net debt has been brought down by almost $8.5 billion in the last year alone and the improvement in cashflow we should see whilst prices remain buoyant.

It could also prompt a rise in the dividend this year considering payouts remain at around half of pre-pandemic levels, although both BP and Shell have been keen to return excess cash using the flexibility offered through buybacks rather than through the longer-term commitment attached to dividends.

 

Where next for the BP share price?

The latest uptrend in BP shares started in late 2021 and the stock has rallied over 15% since the start of 2022 alone to trade at a post-pandemic high of over 404p.

The bullish RSI and rising moving averages support the view the current uptrend can continue. Shares need to hit 426p, a brief ceiling for the stock in March 2020 before plunging lower as the pandemic took hold, before it can target the pre-pandemic floor of 450p seen the month before. A move above here would be more significant as it opens the door to the 2020-high of 508p.

The 2022-low of 360p is the first downside target for the stock, roughly in-line with the 50-day sma at 358p, before the 100-day sma at 350p comes into play. The 200-day sma has acted as the ultimate floor for the stock during the last 12 months, with shares briefly slipping below the moving average before swiftly recovering, and that currently sits at 328p.

BP shares have hit post pandemic highs in early 2022

 

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