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BP Q3 profit down by a third, tops forecasts

BP Q3 profit down by a third, tops forecasts

BP PLC, Europe's second-largest oil company, reported higher than expected profits in the third quarter though earnings were depressed by the sharp fall in oil and gas prices in the past year.
BP posted a third-quarter profit of $5.3 billion, 34 percent below the year ago figure of $8.0 billion but still about $1.5 billion ahead of analysts' forecasts.
The company declared a dividend of 14 cents per share, unchanged. BP shares were up 3.5 percent to 586.5 pence in midafternoon trading on the London Stock Exchange, easing back from an early 5 percent jump.
Analysts were impressed that BP had met its full-year target of cutting annual costs by $3 billion, and had achieved a modest reduction in its debt.
"BP is harvesting the fruits of its turnaround program," said Richard Griffith, analyst at Evolution Securities. He said the company benefited from reduced operating downtime, volume growth and sharply reduced operating costs.
BP's results "provided further reassurance that, in the current oil price environment, the attractive 6 percent dividend yield is sustainable," added Jonathan Jackson at Killik & Co.
Replacement cost profit, a key oil industry measure, was down by half to $4.98 billion from $10.03 billion a year earlier, though well up from $3.14 billion in the second quarter. The figures exclude inventory gains and losses and tax charges and credits.
"BP's contribution to what is becoming a strong third quarter earnings season is likely to meet with broker upgrades, potentially strengthening the current market consensus even further from its current buy status," said Richard Hunter, analyst at Hargreaves Lansdown Stockbrokers.
Earnings reflected a big drop in oil prices from an average of $115 a barrel last year to about $68 a barrel, and an even deeper decline in gas prices.
Production of 3.9 million barrels per day in the third quarter was up 7 percent from the previous year, helped by fewer disruptions from hurricanes. Factoring out storms, production was still 4 percent higher than a year ago, BP said.
Production for the first nine months was 3.98 million barrels per day, up 4 percent compared to 2008.
Comparisons will get tougher in the fourth quarter, analysts at Collins Stewart said, because BP's big Thunder Horse platform in the Gulf of Mexico had made a significant contribution to the last quarter of 2008 when it commenced full operation and production reached 200,000 barrels a day.
BP operates the Thunder Horse platform and field, 150 miles (240 kms) southeast of New Orleans, and owns 75 percent; Exxon holds 25 percent.
Replacement cost profit _ which excludes changes in the value of crude inventories, measuring the amount it would cost to replace assets at current prices _ for the first nine months was $10.5 billion, compared to $23 billion in 2008. Net profit was down from $24.5 billion to $12.3 billion.
Costs for the first nine months were down more than 15 percent from last year, said BP, which raised its target for this year to $4 billion in savings.
Byron Grote, BP's chief financial officer, told analysts that while 50-60 percent of the savings were through the company's efforts including restructuring, "the rest is a combination of foreign exchange benefits of stronger dollar and lower fuel costs."
"A large element of the cost savings will have come from currency gains and lower fuel costs, but BP maintains that over half of the improvement is from self-help and improved operational efficiency," said Gordon Gray and James Evans, analysts at Collins Stewart.
In September, BP announced a major discovery in the Gulf of Mexico where it is the largest oil and gas producer. It said the well, one of the deepest ever drilled, reached a pool of oil big enough to supply U.S. consumption for nearly one year, but the amount which can actually be extracted has yet to be determined.
Tony Shephard, analyst at Charles Stanley & Co., noted that BP had reduced its net debt to $26.3 billion in the third quarter, a reduction of $800 million from the second quarter.
"This could signal an important turning point. With the benefit of lower costs, BP has demonstrated that it can invest to grow the business and maintain the high dividend payout," Shephard said.
"Oil prices have been recovering for most of the year but gas prices and refining margins remain depressed, at the moment. Overall, the results for 2009 could represent a trough in the earnings cycle," Shephard added.
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http://www.bp.com/


Updated : 2021-06-20 15:45 GMT+08:00