BP Profits Jump 136%, But Brown Cites Uncertain Outlook

BP p.l.c. reported record first quarter results of $3,729 million compared with $1,582 million a year ago, a 136% increase, spurred by a large jump in exploration and production's volumes and prices, and increases across the board in natural gas and power trading, oil refining and chemicals.

While announcing the "strong quarterly result," BP Group Chief Executive Lord Brown pointed to an uncertain future. "World economic activity has remained weak during the first quarter with few signs of an imminent recovery. Confidence has declined in the USA, Europe and more recently in parts of Asia."

There is much uncertainty surrounding oil prices, he said, while in the U.S. natural gas prices "remain above oil parity in face of the challenge to refill gas storage while production continues to fall. The opening of new pipeline infrastructure later in the second quarter has the potential to narrow differentials in the Rockies."

BP's E&P totals were double those of a year ago, coming in at $4,888 million, adjusted for special items, up from $2,400 million in the first quarter of 2002.

BP cited the strong realizations for liquids, up $11.05/bbl, and natural gas, up $1.60/Mcf from a year ago. North American natural gas realizations lagged the increase in the Henry Hub marker price, as the effects of cold weather and low inventories were partly offset by an increase in regional differentials caused by pipeline constraints.

Nevertheless, BP collected an average of $5.27/Mcf in the U.S. in 1Q 2003, compared to $2.13/Mcf in 1Q 2002 and $3.31/Mcf in the fourth quarter of 2002. BP noted its prices compared unfavorably to the Henry Hub prices of $6.53, $2.35 and $3.99 respectively. U.S. gas production dropped from about 3.6 Bcf/d to 3.4 Bcf/d, despite a ramp up in production in the deepwater Gulf of Mexico.

For liquids BP collected an average $29.36/bbl for the quarter, compared to $17.26/bbl in 1Q 2002 and $23.28/bbl in 4Q 2002.

North American marketing margins were up significantly, driven by the prolonged cold weather in the Northeast and Midwest markets and an unusually large draw-down of gas in storage. Overall, BP's marketing of gas, power and renewables brought in $194 million, compared to $111 million a year ago.

North American marketed gas volumes were 35% above the same period last year. The first quarter natural gas liquids result was up due to higher liquids prices and improved margins on winter propane sales, partly offset by the negative processing margins that resulted from gas prices increasing more than liquids prices.

BP marketed 11.7 Bcf/d in the U.S. in 1Q 2003, compared to 8.7 Bcf/d in 1Q 2002 and 10.7 Bcf/d in 4Q 2002. Its natural gas liquids volumes in the U.S. were nearly even with the same quarter last year at 232 million b/d.

BP said its global LNG business continued to grow profitably as supply and shipping flexibility allowed the capture of additional business in Asia and the United States.

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