How BP’s Earnings Surprise Helped Boost Energy ETFs

bp headquarters docklands london

BP Plc (BP) shocked the investing world yesterday following the company’s Q1 earnings report. The company is the third-largest supplier of oil in Europe, and investors forecasted a 26 cent loss on the quarter. The company posted an EPS of $0.17, a major decline from Q1 2015 when the company’s EPS was $0.85.

BP further maintained their $0.10 dividend.

Solid refining and trading performance allowed BP to overcome analyst forecasts for a company that is still suffering from the 2010 oil explosion. The explosion cost BP hundreds of millions in Q1 alone. Revenues for the company have also slumped 30.4% over the last 12 months, falling to $39.17 billion.

Shares for the company jumped 5.4% on the news, and nearly 16 million shares were exchanged on the day.

A bright spot for a company trying to survive lower gas and oil prices, BP also announced that it will reduce capital spending from $17 billion in 2016 to $15 billion in 2017 in an effort to turn the company around.

BP’s strength puts the company on the rebound and has further helped energy ETFs receive a boost on Tuesday.

SPDR S&P International Energy Sector ETF (IPW)

IPW maintains a 9.8% allocation of BP stock, and the portfolio has 93.6% allocated to oil, gas and consumer fuels. The ETF jumped over 1.55% in early morning trading following the release of BP’s earnings.

There are over 155 securities held by the company.

The fund increased its holdings of BP stock to 10.24% of its portfolio weight following the company’s stock rising. The ETF’s first and second held stocks are Total SA (12.41%) and Royal Dutch Shell (11.12%).

iShares Global Energy ETF (IXC)

The ETF maintains 81 stocks in its basket, with BP making up just 4.3% of the fund’s assets. BP is the fund’s seventh largest asset. The oil and gas sector account for 57% of the fund’s returns, with 59.2% of the stocks in the portfolio being U.S. firms.

Following the earnings release, the fund is up over 1.2% on the day,

BP’s troubles may be far from over, but a recent report from the World Bank suggests oil prices will rise to $41 a barrel on the year, up from previous forecasts of $37 a barrel for the year. If oil can maintain its rebound, BP and the energy ETFs that have a large percentage of their assets in BP stock will perform well going into the mid-year.

Ben Myers

Ben began his long career in international finance and investing after graduating with a degree in Finance & Accounting. Prior to founding a financial advisory firm he worked with multi-national institutions including HSBC and Bank of Ireland. After several stints as a chief analyst at forex/binary options companies Ben still remains a keen trader and featured contributor on numerous financial sites.