BP profits soar on oil price but Texas weighs
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BP profits soar on oil price but Texas weighs
Tue Jul 26, 2005 10:17 AM BST
By Tom Bergin, European Oil and Gas Correspondent
LONDON (Reuters) - Oil giant BP reported surging second-quarter profits on Tuesday thanks to high oil prices, but a near $1 billion (576 million pound) hit from a blast at its Texas City refinery in March dashed expectations of a record result.
BP, the world's second-largest oil company by market capitalisation, added in a statement that it would have to pay an extra $500 million to meet its existing capital expenditure plans this year.
Higher dividends and an acceleration in BP's buybacks failed to counter the bad news, leaving BP shares down 0.6 percent at 638-1/2 pence by 0849 GMT, compared with a 0.3 percent fall in the DJ Stoxx European oil and gas index.
BP said its replacement cost net profit for the second quarter was $4.981 billion, up 29 percent on the year.
The result would have been a record but for a non-operational charge of $826 million, mainly related to an explosion at BP's refinery in Texas City, Texas, which killed 15 people and injured 170 others.
The "clean" result, which ignores one-off events and is the measure most watched by investors and analysts, was a record $5.807 billion, compared with a Reuters poll of 10 analysts which gave an average forecast of $5.656 billion.
This was up from a "clean" $4.071 billion in the same period of last year.
BP took a $700 million charge for fatality and personal injury compensation claims associated with the Texas City blast, which BP blamed on junior employees but which labour unions blamed on the design of the isomerization unit involved and procedural errors.
Additionally, losses due to a reduction in operations were $200 million in the second quarter, a spokeswoman said, a figure which could be repeated in coming quarters.
The clean-up and investigation into causes of the incident will cost up to $40 million, while industry sources say the reconstruction of the isomerization unit would cost around $200 million.
Analysts had initially expected Texas City to cost BP around $400 million in total, although some later suggested it could cost up to $1 billion. The firm does not have third-party insurance for such events.
MORE BUYBACKS
The bad news was tempered by BP's announcement that it would accelerate buybacks.
Chief Executive John Browne said in a statement the firm would buy at least $6 billion of its shares in the second half, up from $4 billion in the first half and $7.5 billion in 2004.
Previously BP had not given figures for the value of its planned buyback programme.
BP also raised its dividend to 8.925 cents from 8.5 cents in the first quarter.
However, the London-headquartered firm added its gearing level was only 18 percent, below a 20-30 target range, suggesting it has more headroom to increase disbursements to shareholders.
BP showed again that it was not immune to the industry trend of rising costs.
Browne said BP's capital expenditure budget for 2005 would be $14.5 billion, against earlier indications of $14 billion.
He added investment for 2006 would be around $15 billion, compared to earlier indications of about $14 billion.
"One slight negative was increased guidance on capex for 2006; from $14 billion to $15 billion, not surprising given service sector inflation and steel prices," Citigroup said in a research note.
Investors were watching for clues on whether the start-up of BP's Thunder Horse platform in the Gulf of Mexico, the largest facility of its kind in the world, would be delayed, but BP gave none.
Thunder Horse was discovered to be listing following the passing of a Hurricane through the area earlier this month. Analysts said production at the flagship project could be delayed six months.
STRONG REFINING MARGINS
BP's profits were driven mainly by its upstream exploration and production unit's performance, which was buoyed by the record oil prices, at times north of $60 a barrel, seen in the second quarter.
"The main area of positive surprise was the upstream result ... Better-than-expected realisations drove this positive surprise," Citigroup said.
Higher oil and gas output also helped, rising 3.5 percent on the year to 4.11 million barrels of oil equivalent per day.
Downstream, refining margins were a hefty $8.42 per barrel, although the higher-than-expected Texas City costs meant overall unit performance fell short of analysts' expectations.
BP profits soar on oil price but Texas weighs
Tue Jul 26, 2005 10:17 AM BST
By Tom Bergin, European Oil and Gas Correspondent
LONDON (Reuters) - Oil giant BP reported surging second-quarter profits on Tuesday thanks to high oil prices, but a near $1 billion (576 million pound) hit from a blast at its Texas City refinery in March dashed expectations of a record result.
BP, the world's second-largest oil company by market capitalisation, added in a statement that it would have to pay an extra $500 million to meet its existing capital expenditure plans this year.
Higher dividends and an acceleration in BP's buybacks failed to counter the bad news, leaving BP shares down 0.6 percent at 638-1/2 pence by 0849 GMT, compared with a 0.3 percent fall in the DJ Stoxx European oil and gas index.
BP said its replacement cost net profit for the second quarter was $4.981 billion, up 29 percent on the year.
The result would have been a record but for a non-operational charge of $826 million, mainly related to an explosion at BP's refinery in Texas City, Texas, which killed 15 people and injured 170 others.
The "clean" result, which ignores one-off events and is the measure most watched by investors and analysts, was a record $5.807 billion, compared with a Reuters poll of 10 analysts which gave an average forecast of $5.656 billion.
This was up from a "clean" $4.071 billion in the same period of last year.
BP took a $700 million charge for fatality and personal injury compensation claims associated with the Texas City blast, which BP blamed on junior employees but which labour unions blamed on the design of the isomerization unit involved and procedural errors.
Additionally, losses due to a reduction in operations were $200 million in the second quarter, a spokeswoman said, a figure which could be repeated in coming quarters.
The clean-up and investigation into causes of the incident will cost up to $40 million, while industry sources say the reconstruction of the isomerization unit would cost around $200 million.
Analysts had initially expected Texas City to cost BP around $400 million in total, although some later suggested it could cost up to $1 billion. The firm does not have third-party insurance for such events.
MORE BUYBACKS
The bad news was tempered by BP's announcement that it would accelerate buybacks.
Chief Executive John Browne said in a statement the firm would buy at least $6 billion of its shares in the second half, up from $4 billion in the first half and $7.5 billion in 2004.
Previously BP had not given figures for the value of its planned buyback programme.
BP also raised its dividend to 8.925 cents from 8.5 cents in the first quarter.
However, the London-headquartered firm added its gearing level was only 18 percent, below a 20-30 target range, suggesting it has more headroom to increase disbursements to shareholders.
BP showed again that it was not immune to the industry trend of rising costs.
Browne said BP's capital expenditure budget for 2005 would be $14.5 billion, against earlier indications of $14 billion.
He added investment for 2006 would be around $15 billion, compared to earlier indications of about $14 billion.
"One slight negative was increased guidance on capex for 2006; from $14 billion to $15 billion, not surprising given service sector inflation and steel prices," Citigroup said in a research note.
Investors were watching for clues on whether the start-up of BP's Thunder Horse platform in the Gulf of Mexico, the largest facility of its kind in the world, would be delayed, but BP gave none.
Thunder Horse was discovered to be listing following the passing of a Hurricane through the area earlier this month. Analysts said production at the flagship project could be delayed six months.
STRONG REFINING MARGINS
BP's profits were driven mainly by its upstream exploration and production unit's performance, which was buoyed by the record oil prices, at times north of $60 a barrel, seen in the second quarter.
"The main area of positive surprise was the upstream result ... Better-than-expected realisations drove this positive surprise," Citigroup said.
Higher oil and gas output also helped, rising 3.5 percent on the year to 4.11 million barrels of oil equivalent per day.
Downstream, refining margins were a hefty $8.42 per barrel, although the higher-than-expected Texas City costs meant overall unit performance fell short of analysts' expectations.
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