Financial Times: BP result hit by costs of US incidents: “Anyone can make money with oil at $60 a barrel but the question is who can make the most hay in today's sunshine. Compared to Shell, its closest European rival, the answer is BP.”: Wednesday 27 July 2005
By Carola Hoyos
Published: July 27 2005
Profit at BP, Europe's biggest energy company, surged in the last quarter but the result was affected by two incidents in the US.
BP missed out on reporting record second-quarter profit of $5.8bn (£3.33bn) because of the $700m that it had to set aside for litigation and other costs it expects to incur after an explosion in March at its Texas City refinery.
The incident killed 15 people and injured 170.
The second-quarter replacement cost profit - its key profit measure that excludes gains and losses on inventory - rose 29 per cent from $3.87bn to $4.98bn.
Profit in the first half to June 30 also rose 29 per cent from $8.14bn to $10.47bn. Total non-operational charges were $826m. Turnover was $166bn ($139bn) and earnings per share 57.09 cents (42.03 cents).
Lord Browne, chief executive, said investments made in the past decade were capturing the benefit of the strong trading environment. BP would continue to focus on big projects but today's high prices were not conducive to large acquisitions.
BP's share price, which is up 25 per cent this year
compared with the FTSE 100 index's 9.5 per cent, fell 13p to 629½p yesterday.
Investors noted concerns about the delayed start-up of the Thunder Horse field in the US Gulf of Mexico. However, they were pleased to hear that BP planned to increase buy-backs to $6bn in the second half, up from $4.1bn in the first half.
Meanwhile, BP saw no demand erosion thus far and expected oil prices to remain strong, averaging about $40 per barrel for the next four years.
Its overall production growth forecast remained strong compared to its competitors, even though the rapid growth from its Russian venture, TNK-BP, was beginning to slow, analysts said.
Total oil and gas production last quarter averaged 4.11m b/d, up 3.5 per cent from a year before.
Brendan Wilders, analyst at Oriel Securities, said he would likely raise his earnings and dividend forecasts.
* BP ushered in a promising week of big oil earnings. Anyone can make money with oil at $60 a barrel but the question is who can make the most hay in today's sunshine. Compared to Shell, its closest European rival, the answer is BP. But, though BP has done well, problems are taking away some of the shine. The loss of life is clearly the biggest tragedy of BP's refinery fire. The incident again raised questions about BP's safety record.
Additional reporting by Malini Guha in London
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