Daily Telegraph (UK): Thousands wait on quayside but supertanker glides in unchallenged: “…BP has been racing along, and although it failed to beat Shell's record profit, its business looks in much better shape” (ShellNews.net) 9 Feb 05

City comment

Edited by Neil Collins (Filed: 09/02/2005)

The best is yet to come, says BP

Sailing in under the lee of Ellen MacArthur, BP yesterday avoided the storm of tabloid headlines which battered Shell's superstructure last week. One brave reporter asked chief executive Lord Browne why he didn't use the company's billions to save Africa, to which the answer should have been: no problem, provided you don't want petrol, heating oil, anything plastic or a million things we consume without a thought.

The depth of ignorance about what profits are for or what they mean is depressing; it often seems that the BBC's definition is that profit is the difference between what you have to pay for something and what it ought to cost. So perhaps we should be grateful to Ms MacArthur and her smokescreen. Like her, BP has been racing along, and although it failed to beat Shell's record profit, its business looks in much better shape. It's tempting fate when the chief executive says "the best is yet to come", but it's hard to argue with his analysis. His gamble in Russia is already paying handsome dividends, the confiscation of Yukos there notwithstanding, and BP has done the oil company hat-trick of higher profits, more production and increased reserves.

In a distant echo of Shell's problems, BP is struggling to comply with the rules of America's Securities & Exchange Commission. Calculated the SEC way, BP replaced only 89pc of the oil it sold, but it's clear BP thinks this is nonsensical. Production Sharing Contracts, which allow the operator to make a return while leaving ownership with the host country, mean that a higher oil price cuts the reserves the company can claim, even though the actual number of recoverable barrels will have gone up.

This is so obviously perverse that the SEC is coming under increasing pressure to change its rules. Meanwhile, BP is generating profits and cash on an awesome scale. The results are good enough to extinguish memories of that silly cut in the interim dividend. A big final quarterly payment is enough to raise UK investors' income by 4pc, despite the weak dollar – American investors saw a 13pc rise. Should the US currency continue to recover this year (see below) then UK investors should gain on the currency swings what they've lost on last year's roundabouts.

http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2005/02/09/ccom09.xml