Following an announcement earlier this month that it is embarking on a companywide restructuring, industry giant BP plc last week released disappointing third quarter results — a 29% decline in net income — that were largely influenced by refinery problems, lower refining margins and weak marketing and trading results.

Net profit for the third quarter was $4.41 billion (23 cents/share) compared with $6.23 billion (31.4 cents/share) in the year-ago period.

In a conference call with analysts CFO Byron Grote disclosed few details of the company’s upcoming reorganization. As previously announced, BP will be defined by two business segments: Exploration and Production (E&P) and Refining and Marketing. The Gas, Power and Renewables division will be split between these two entities. Alternative Energy, a new, separate division, will handle BP’s low-carbon business and future growth options outside oil and gas (see NGI, Oct. 15).

Grote had little additional information to offer last week. He did say BP’s troubles are not due to its strategy but rather the execution of the strategy. He said the company has too many people analyzing information and blamed this on an “inadvertent” buildup of personnel over the last several years. “We are confident that we have far too complex an organization,” Grote said.

In the works is a “complete house-cleaning” that will likely spare “front-line operational staff.” Grote would not provide any information on what, if any, charge the company would take for the restructuring and referred analysts to an upcoming February 2008 presentation when more information will be available.

Last week the Chicago Tribune reported that about 3,300 Chicago area BP employees would be relocated or laid off as part of the company’s restructuring. “Houston is the headquarters of BP in America and home to over 7,000 BP employees,” the paper quoted an internal memo to employees as saying.

Domestic gas prices realized by BP in the third quarter were off from the second quarter and year-ago period and fell far short of the Henry Hub benchmark for the period. In the third quarter BP realized $4.64/Mcf for its domestic gas compared to $5.94/Mcf in the second quarter and $5.51/Mcf in the year-ago quarter. For the third quarter of 2007 the Henry Hub benchmark was $6.16/Mcf.

Third quarter results in the gas, power and renewables segment were down by more than $200 million from the year-ago period. “This reflected a significant reduction in the contribution from the marketing and trading businesses, lower natural gas liquids volumes and higher alternative energy expenditures, partly offset by improved margins in the natural gas liquids business and a lower charge related to nonoperating items,” the company said. Year-to-date results also were lower, reflecting weaker marketing and trading results and higher expenditures in alternative energy.

Grote was unapologetic about the company’s poor third quarter results in marketing and trading. “This is to be expected; the contribution [of marketing and trading] goes up and down,” Grote told analysts, noting particular volatility in July across all markets. Alluding to steep quarterly trading losses experienced by some investment banks, Grote stressed that BP’s trading performance should be evaluated with a long-term perspective.

Looking forward, Grote said the fourth quarter will be one of “meeting milestones” such as the startup of the company’s Greater Plutonio project and commissioning of its Atlantis project in the exploration and production segment, as well as improvements in the refining business, particularly at the troubled Texas City and Whiting refineries. Grote told analysts they should see improvements in BP’s operational metrics during the first quarter of next year with improvement in the company’s financial performance to follow.

Other results:

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