Residual impacts from last year's Gulf of Mexico hurricanes, higher taxes and a prolonged Texas refinery shutdown sent BP plc's 1Q2006 net profit down 15% from a year ago, despite higher commodity prices. The London-based major posted a net profit of $5.63 billion, compared with $6.602 billion in 1Q2005.

Last year's first quarter profit, said BP, benefited from $1.07 billion in asset sales, including BP's 10.34% stake in Ormen Lange, a natural gas field off Norway's continental shelf. Quarterly replacement cost profit was $5.282 billion, up 6% from $4.96 billion posted in 1Q2005. Replacement cost profit strips out inventory gains and losses. Wall Street had pegged BP's replacement cost profit to be about $5.1 billion.

Still recovering from hurricane damage in the deepwater Gulf of Mexico, U.S. natural gas production dropped in the quarter to 2.485 Bcf/d from 2.648 Bcf/d in 1Q2005. However, output was up sequentially from 4Q2005's 2.359 Bcf/d. Worldwide gas production reached 8.713 Bcf/d, down slightly from a year ago's output of 8,745 Bcf/d, but up from 4Q2005's 8,458 Bcf/d.

Production of more than 4 MMboe/d was down around 2% compared with a year ago, mostly because of the "lingering effects of last year's Gulf of Mexico hurricanes, notably on the Mars field," BP said. BP owns a 28.5% stake in the deepwater Mars field, which is majority owned and operated by Shell Exploration & Production Co. Shell expects initial production from the Mars platform to resume in late May (see Daily GPI, April 21).

"Looking towards the end of the year we expect a marked pickup in production as a number of major projects come on stream, including Thunderhorse in the Gulf of Mexico, the BTC pipeline and the Shah Deniz gas project in Azerbaijan, and Dalia in Angola," said John Brown, CEO. "World economic growth appears robust. The U.S. appears to have rebounded in the first quarter, Europe continues to show promise of an acceleration of growth, and Asia and Latin America are growing at or around trend. The near-term global outlook appears strong."

U.S. gas prices averaged $9.01/MMBtu (Henry Hub first-of-month index) in the quarter, nearly $4/MMBtu below 4Q2005. "Demand weakness has more than offset supply lost following last year's hurricanes, resulting in a substantial gain in inventories relative to seasonal norms," BP said. "Mild winter weather has contributed to demand softness. As a result, prices have fallen below parity with residual fuel oil. U.S. gas prices are expected to track broadly with oil prices but are vulnerable to further relative declines if demand remains weak."

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