Rising commodity prices failed to lift London-based BP plc, which reported a 3.6% drop in quarterly earnings Tuesday. The oil major also warned daily oil and natural gas production will be slightly lower for the year.
Net profit totaled $6.23 billion (31.4 cents/share), compared with $6.46 billion (30.5 cents) in 3Q2005. Revenue rose just over 4% to $70.73 billion from $67.96 billion. BP's accounting conforms to international financial reporting standards rather than Generally Accepted Accounting Principles, which are used by U.S.-based companies.
BP slightly downgraded its daily average production for 2006. It now expects the year's output to average around 3.950 million boe/d, which is below the 4.014 million boe/d in 2005. The decrease came from asset sales and the impact of higher prices on entitlements under production-sharing contracts. In the quarter, production reached 3.816 million boe/d, flat from 3.824 million boe/d reported in 3Q2005. Quarterly production also fell sequentially from 2Q2006's 4.018 million boe/d.
"The trading environment reflected higher oil realizations and retail margins but lower refining margins and gas realizations compared to a year ago," CEO John Browne said in a statement. He also noted BP's effective tax rate was about 40% in the quarter, up from 36% in 2Q2006.
The producer shut in 200,000 bbl/d of production from its 450,000 bbl/d Prudhoe Bay field in Alaska after severe pipeline corrosion and a leak were found. Production currently stands at 400,000 bbl/d, BP said.
BP also reiterated a delay in the start-up of its deepwater Gulf of Mexico Thunder Horse platform, which is designed to produce 250,000 bbl/d of oil and 200 MMcf/d of gas. The facility was expected to ramp up this year, but it now will begin operations in mid-2008 (see Daily GPI, Sept. 19).
Friedman, Billings, Ramsey & Co. Inc. energy analysts said upstream operating earnings of $7.5 billion were in line with their expectations, citing "the lingering effects of last year's hurricanes, divestments, and higher crude oil prices. Adding back 150,000 boe/d for divestments, price effects and the Prudhoe Bay shutdown, we estimate production would be at the lower end of the company's 4.1-4.2 million boe/d prior guidance."
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