London-based BP Plc, considered the third largest energy company in the world, joined its peers in reporting a third quarter profit slide, the first in more than two years, with earnings down 20% because of the decline in oil and gas prices. The global giant said it also does not expect to see high returns into the fourth quarter. Earnings were $3.05 billion, or 14 cents a share, down from $3.08 billion, or 17 cents a share for the same period in 2000. BP measures its earnings on a replacement cost basis, which excludes one-time items and goodwill costs.
Exxon Mobil Corp., the largest publicly traded company, saw its earnings down 29% for the third quarter, while Royal Dutch/Shell Group, in second place, reported a 17% decline in profits for the third quarter.
BP’s exploration and production profit fell 26% from a year earlier to $3.07 billion. Its average natural gas price was $2.49/Mcf, and its oil price averaged $23.08/bbl, which was a drop of 17% for both. However, production was actually up 3%, and Lord John Browne, chairman, said the company will still meet its goal to push production up an average 5.5-7% a year.
BP’s natural gas production was up 8%, and liquids were slightly down. Gas production got a boost from “strong growth output” in a joint venture in Argentina, which was up 40%, and another in North America, which was up 6%, Browne said. Crude oil production from the deepwater Gulf of Mexico jumped 25% as new capacity was added.
“Despite a weaker world economy, BP continues to deliver great profits and great growth,” said Browne in a statement. “Our plans are robust to the poorer trading environment, and we will continue our established approach to cost management and investment selection.”
In support of continued growth, capital expenditures in the quarter were $2.4 billion, $0.6 billion higher than a year ago, with most of the money directed toward growth in Europe and Africa.
BP said marketing and trading in the quarter had improved “on the back of a continued increase in activity with gas sales volumes up 24% on a year ago,” noting that the activity had offset lower margins in its natural gas liquids business. Trading and marketing activities also are expected to improve into the future following an agreement by BP in September to purchase natural gas marketing and trading assets from TransCanada PipeLines Ltd. (see Daily GPI, Sept. 24).
Browne said a “critical issue” facing the company into the future has to do with the actions by OPEC to “pull the crude [oil] price back within its target range,”. “U.S. natural gas prices have settled at more normal levels, though we should expect the usual seasonal variations…While the climate is unsettled, the world is still open for business. For our part we are intensifying our focus on cost and investment discipline to ensure we sustain underlying performance, keep growth fully profitable and maintain our robust financial health. Production growth remains on target, at a very competitive level.”
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