BP posts sharply higher third-quarter profits

Jane Wardell

Associated Press Writer

High oil and gas prices and bigger profit margins in refining helped the British energy giant BP PLC nearly double its third-quarter earnings.

However, the company also warned Oct. 26 that it would have to spend more on its business next year because of the weak U.S. dollar and continued inflationary pressures in some markets.

BP said it earned $4.48 billion for the three months ending Sept. 30, up from $2.34 billion for the same period a year ago. Revenues rose to $73.85 billion from $59.16 billion a year ago.

“This has been another strong performance against the backdrop of strong global demand,” said BP chief executive John Browne.

That demand was underpinned by soaring crude oil prices.

The price of benchmark North Sea Brent crude — propelled by factors including the loss of U.S. production following Hurricane Ivan, low inventories and limited spare capacity — averaged $41.54 a barrel in the second quarter. That was more than $6 per barrel higher than second quarter prices.

Exploration and production, BP’s biggest business, posted a 30 percent jump in profits to a record $5.14 billion as the company reaped benefits from its tie-up with Russian oil group TNK.

BP’s refining marketing division recorded an 89 percent leap in operating income to $1.3 billion. Refining margins slipped from record levels in the second quarter but remained high due to strong growth in demand and low stocks, BP said.

The profits were curbed by an almost 50 percent increase in taxes paid to $2.11 billion during the quarter from $1.43 billion a year earlier.

Capital spending up

Excluding stock holding gains for the period, BP reported what it calls a replacement cost profit of $3.46 billion for the quarter, up from $2.26 billion a year earlier. BP said the replacement cost result strips out fluctuations in the value of stock holdings.

BP also reported a pro forma net profit, which it said excludes losses or gains from the sale of assets or termination of operations, of $3.94 billion, up 43 percent from $2.76 billion a year ago.

BP produced 3.91 million barrels of oil and gas a day, up from 3.5 million a year earlier, the company said. It has a target to produce an average of more than 4 million barrels a day this year, which would be up 11 percent from 2003.

For the first nine months of the year, BP reported a profit of $13.2 billion, up from $8.15 billion a year earlier. Nine-month revenue came to $214.49 billion, up from $176.38 billion a year ago.

Browne: Oil will stay above $30 a barrel

Petroleum News

He sees the $30 support level “for at least the medium term,” predicting the Organization of Petroleum Exporting Countries will maintain its production discipline because of the revenue needs of its members.

Browne called 2004 “an exceptional year” for oil prices, noting that during the late 1990s and early 2000s, global oil consumption rose at about half the rate of economic growth. In 2004, the growth rates will be much closer — 3.4 percent for oil consumption and 4 percent for worldwide gross domestic product.

“The most important driving factor behind the shift appears to have been the demand for energy-intensive products in China,” he said.

Browne warned that the oil industry would run out of spare capacity if demand continued to grow at levels seen in 2004.

BP, he said, “will continue to use a Brent oil price of $20 per barrel” for planning its E&P spending, he said