BP Amoco posts 60 percent rise in third-quarter profit

by The Associated Press

Surging oil prices led to a 60 percent jump in third-quarter profits for BP Amoco PLC, with higher sale prices for crude more than making up for the pinched margins for refined products and chemicals.

The Anglo-American company said Nov. 8 it had a quarterly operating profit of $1.74 billion, compared to $1.09 billion the year before.

Adjusted operating profit came to $1.98 billion after eliminating writedowns in inventory and other one-off charges related to the cost BP incurred for its merger with Amoco. The company, formed by British Petroleum PLC’s purchase last year of Chicago-based Amoco Corp., is in the process of absorbing Atlantic Richfield Corp.

BP Amoco said Nov. 5 it will give up big chunks of its Alaska oil production and the trans-Alaska oil pipeline in exchange for Gov. Tony Knowles’ approval of the company’s pending $26 billion takeover of ARCO.

Better control over costs contributed to BP Amoco’s strong results. The company said operating profit for exploration and production, its biggest line of business, tripled from the third quarter of 1998.

Global prices were languishing last year at their lowest level in more than two decades. But BP Amoco received an average price of $19.17 per barrel in the third quarter, up from an average of $11.59 during the same period in 1998.

The results exceeded the expectations of many analysts, and BP Amoco shares ended Nov. 8 trading at $9.34 per share, up 5 percent from Nov. 5’s close.

The company’s refining and marketing margins suffered because sales prices for gasoline and other refined products increased more slowly than the cost of the oil needed to produce them. Adjusted operating profit for BP Amoco’s refining and marketing unit slipped 3 percent to $662 million.

Operating profit in the company’s chemicals business fell 53 percent to $143 million, due to merger-related costs and higher input prices.

Chief executive John Browne acknowledged the benefit higher crude prices had on quarterly earnings.

Global oil prices have risen sharply since OPEC members agreed in March to curtail production. The company predicted that prices would remain reasonably stable if producing countries maintained their discipline. Refining and chemicals margins were likely to remain under pressure, the company said.