BP stock underperforms US rivals Chevron and Exxon Mobil

Soaring oil prices have led to oil stocks outperforming the rest of the index and overcoming the current inflationary pressures. However, US oil giants Chevron and Exxon Mobil have performed better than BP, as it faced large costs due to its former stake in Russian oil producer Rosneft.

Global indices have struggled significantly over the past year. As of 6 July, the S&P 500 has dipped 19.3% and the FTSE 100 has dipped 3.7%. By contrast, oil giants have performed excellently in the same period due to rising commodity prices. Over the past year, the price of Brent Crude has soared from $73 to $100.83 as of 7 July.

This has benefitted the world’s largest oil producers, including Exxon Mobil [XOM], Chevron [CVX] and BP [BP.L]. Over the past year, the Exxon Mobil share price has soared 36.1%, the Chevron stock has climbed 20% and BP shares have risen a slightly more disappointing 11.5%. Recession fears have seen each of the oil giants dip slightly over the past month, however, amid concerns that economic downturn and weakening demand will cause oil prices to fall. Nevertheless, analysts remain fairly confident on the outlook for these three oil giants.

Chevron: excelling performance

Chevron has been among the top-performing oil stocks over the past year. This has mainly been due to its excellent set of results. For example, in the first quarter of 2022, Chevron reported earnings of $6.3bn, up from $1.4bn the year before. Revenues also increased from £31bn to £52bn over the year, mainly due to the rising oil price.

During this period, Chevron has also been able to increase production to a record 692,000 barrels per day. For 2022, the company raised its guidance for annual production to between 700,000 and 750,000 barrels per day, representing a 15% increase from last year.

Chevron also has a diversified source of income. For example, in the first quarter of 2022, the group made $331m in profits from its downstream division, which includes operating transmission pipelines and refineries. If the oil price falls due to recession worries, Chevron may be able to deal with this better than some other oil companies. The group also acquired Renewable Energy Group for $3.15bn at the start of this year, boosting its lower-carbon business.

Analysts remain fairly confident about the prospects for the Chevron share price. According to the Wall Street Journal, Chevron has 23 ‘buy’ ratings and eight ‘hold’ ratings. It has a median price target of $182, implying an upside of 29.3% from its 6 July closing price.

Exxon Mobil: further developments in Q2

Like Chevron, Exxon has also been delivering huge profits. Indeed, in the first quarter, earnings increased to $5.5bn, up from $2.7bn the year before. Excluding the $3.4bn after-tax charge resulting from the company’s Russian operations, earnings increased more than $6bn year-on-year to $8.8bn.

Free cash flow of $14.8bn in the quarter also supported extremely large shareholder returns. For example, the company repurchased $2.1bn of its stock in the first quarter, and it plans to repurchase up to $30bn through to 2023. This should reduce the company’s outstanding shares and boost metrics such as earnings per share.

For the next quarter, analysts are also very confident. In fact, according to Wells Fargo, the group could report around $18bn in profits. Credit Suisse has also indicated that the second quarter could be one of the strongest in the company’s long history.

According to analysts polled by the Wall Street Journal, Exxon has 13 ‘buy’ ratings, 17 ‘hold’ ratings and one ‘sell’ rating. It also has a median price target of $102, implying a potential upside of 22.5% on its 6 July closing price.

BP: underperformance due to former Rosneft stake

BP has underperformed its US oil rivals, mainly due to its former 19.75% stake in Rosneft and other Russian businesses, which it exited in the first quarter of this year following Russia’s invasion of Ukraine. This led to pre-tax charges of around $25.5bn, meaning that BP reported a loss of $20.4bn in the quarter. However, this was purely an accounting measure, and the cash position of the company has not been impacted.

Indeed, underlying replacement cost profit, which excludes this pre-tax loss, totalled $6.2bn, up from $2.6bn in the year-ago quarter. Operating cash flow also reached $8.2bn, supporting a decrease of net debt and a share buyback programme of $2.5bn, which will be executed prior to the second quarter results.

In comparison with Chevron and Exxon Mobil, analysts are also the most confident about the prospects for the BP share price. According to MarketBeat, the group has six ‘buy’ ratings and one ‘hold’ rating. Its consensus price target is 540p, implying an upside of 46.5% its closing price on 6 June.