BP Third-Quarter Profit Gains on Record Oil, Higher Gas Prices

BP Third-Quarter Profit Gains on Record Oil, Higher Gas Prices


Oct. 28 (Bloomberg) -- BP Plc, Europe's second-biggest oil company, said profit rose 83 percent in the third quarter as record crude and higher natural-gas prices outweighed production setbacks in Azerbaijan and the Gulf of Mexico.

Net income increased to $8.05 billion from $4.41 billion a year ago, the London-based company said today in a statement distributed by the Regulatory News Service.

Crude surged to an all-time high of $147.27 in New York on July 11, boosting earnings at oil companies. Prices have since slid more than 50 percent. Shipments through the BP-led Baku- Tbilisi-Ceyhan pipeline were disrupted by a fire and gas leak, while hurricane-induced shutdowns in the U.S. also hurt output.

``BP should still deliver one of the best year-on-year earnings per share growth rates,'' Dresdner Kleinwort analyst Colin Smith wrote in a note before the earnings were released. BP had the ``most profitable barrels in the period.''

BP stock fell 20 percent in the third quarter on concern that a slowing world economy will crimp demand for fuel. That compared with a 22 percent drop for larger rival Royal Dutch Shell Plc, which reports earnings in two days. BP closed down 0.5 percent yesterday at 438 pence while Shell lost 0.8 percent to 1,460 pence.

New York oil futures were on average 57 percent higher in the third quarter compared with a year earlier. Natural-gas futures were up 44 percent. Crude has since slid close to a 17- month low on declining demand for fuel in the U.S., the world's largest importer of crude.

Analyst Recommendations

Of the 31 analysts tracked by Bloomberg who cover BP, 20 recommend buying the shares, 9 advise holding the stock and two say ``sell.''

Excluding one-time items and gains or losses from inventories, profit was expected to climb 62 percent to $6.82 billion, according to the median estimate of 10 analysts surveyed by Bloomberg News.

Chief Executive Officer Tony Hayward pledged earlier this year to boost output 13 percent in the next five years to 4.3 million barrels of oil equivalent a day. BP is budgeting an average oil price of $60 a barrel to keep production above 4 million barrels a day through 2020.

Last month, BP paid $1.9 billion for Arkansas natural-gas properties from Chesapeake Energy Corp., tapping fuel from rock formations that are more costly to exploit than traditional fields. The purchase followed BP's $1.75 billion acquisition of Chesapeake's assets in Oklahoma's Woodford Shale formation back in July.

BP also settled a dispute over the running of the company's joint venture in Russia with its billionaire co-owners after Hayward agreed to replace TNK-BP's CEO Robert Dudley.

TNK-BP Settlement

The accord left BP with its stake in the 50-50 venture intact while acceding to demands by the Russian billionaires -- Mikhail Fridman, German Khan, Viktor Vekselberg and Len Blavatnik, collectively known as AAR -- for a more independent board. TNK-BP accounts for almost a quarter of BP's global output and reserves.

BP was forced to halt its 475,000-barrel-a-day Texas City refinery for three weeks on Sept. 11 as Hurricane Ike swept through the region.

Oil shipments through the BTC pipeline, which transports Azeri crude blend from the Caspian Sea to Turkey's Mediterranean Sea, have been disrupted since August. BP also suffered a shutdown from its Angolan Greater Plutonio fields of about two months after an equipment failure.

BP's Global Indicator Margin, a broad measure of refining profitability, averaged $8.03 a barrel in the third quarter, unchanged from a year earlier, according to BP's Web site.

BP will hold a conference call on the third-quarter earnings at 2 p.m. London time.

BLOOMBERG