The Independent: Hurricanes to knock more than $700m off BP's profits: “Goldman said it regarded BP shares as fully valued after their strong rise this year, adding that Shell offered "more upside potential".: Wednesday 5 October 2005

By Michael Harrison, Business Editor

Published: 05 October 2005

BP warned yesterday that last month's hurricanes in the Gulf of Mexico would wipe more than $700m (£400m) from its profits in the third quarter and prevent it from meeting its oil production forecast for the year.

The warning sent BP shares 3 per cent lower as analysts scrambled to revise their earnings forecasts for the period. Shares in Royal Dutch Shell also suffered, falling more than 2 per cent on fears the impact of the hurricanes on the company would be worse than expected.

BP said that Hurricanes Katrina and Rita had not only affected oil and gas production in the Gulf of Mexico but also hit output from its Texas City refinery and reduced refining margins. BP said it would have to foot the bill for the clean-up and repair of damaged facilities.

In addition to the estimated $700m cost, BP said $100m was spent during the quarter repairing its Thunder Horse platform which was badly damaged by Hurricane Dennis this year.

As a result of the lost production, BP indicated it would miss its goal of producing 4.1 million to 4.2 million barrels of oil a day this year. The company estimated the impact of the hurricanes and a reduced contribution from production-sharing contracts at 130 million barrels a day. BP said production for the third quarter had averaged 3.8 million barrels a day, down from 4.1 million barrels in the second quarter.

Goldman Sachs cut its third-quarter earnings forecast for BP by $1.1bn, citing the bigger-than-expected impact of the hurricanes and a weaker performance from the group's marketing division, which includes petrol retailing. Goldman said it regarded BP shares as fully valued after their strong rise this year, adding that Shell offered "more upside potential".

Meanwhile, BP's chief executive, Lord Browne of Madingley, met the Russian leader, President Vladimir Putin, last night at a function hosted by Tony Blair in Downing Street. BP is the biggest Western investor in Russia after its $7bn purchase of a 50 per cent stake in TNK-BP, the country's No 3 oil producer.

A spokesman for BP said Lord Browne was one of a number of British businessmen who attended the reception for Mr Putin. It would have been quite natural for BP's chief executive and the Russian president to discuss the progress of its joint venture, given TNK-BP's prominent position in the industry.

BP warned yesterday that last month's hurricanes in the Gulf of Mexico would wipe more than $700m (£400m) from its profits in the third quarter and prevent it from meeting its oil production forecast for the year.

The warning sent BP shares 3 per cent lower as analysts scrambled to revise their earnings forecasts for the period. Shares in Royal Dutch Shell also suffered, falling more than 2 per cent on fears the impact of the hurricanes on the company would be worse than expected.

BP said that Hurricanes Katrina and Rita had not only affected oil and gas production in the Gulf of Mexico but also hit output from its Texas City refinery and reduced refining margins. BP said it would have to foot the bill for the clean-up and repair of damaged facilities.

In addition to the estimated $700m cost, BP said $100m was spent during the quarter repairing its Thunder Horse platform which was badly damaged by Hurricane Dennis this year.

As a result of the lost production, BP indicated it would miss its goal of producing 4.1 million to 4.2 million barrels of oil a day this year. The company estimated the impact of the hurricanes and a reduced contribution from production-sharing contracts at 130 million barrels a day. BP said production for the third quarter had averaged 3.8 million barrels a day, down from 4.1 million barrels in the second quarter.

Goldman Sachs cut its third-quarter earnings forecast for BP by $1.1bn, citing the bigger-than-expected impact of the hurricanes and a weaker performance from the group's marketing division, which includes petrol retailing. Goldman said it regarded BP shares as fully valued after their strong rise this year, adding that Shell offered "more upside potential".

Meanwhile, BP's chief executive, Lord Browne of Madingley, met the Russian leader, President Vladimir Putin, last night at a function hosted by Tony Blair in Downing Street. BP is the biggest Western investor in Russia after its $7bn purchase of a 50 per cent stake in TNK-BP, the country's No 3 oil producer.

A spokesman for BP said Lord Browne was one of a number of British businessmen who attended the reception for Mr Putin. It would have been quite natural for BP's chief executive and the Russian president to discuss the progress of its joint venture, given TNK-BP's prominent position in the industry.

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