Beset by safety problems and still recovering from last year’s Gulf of Mexico storms, BP plc reported in an interim update Wednesday that its 3Q2006 oil and natural gas production year-over-year will be flat and will fall sequentially from 2Q2006 to 3.8 million boe/d from 4.01 million boe/d. Houston-based Marathon Oil Corp., meanwhile, said its quarterly production is in line with forecasts.
In February, BP forecast production this year would average between 4.1-4.2 million boe/d. However, the forecast preceded the shutdown of BP’s Prudhoe Bay operations in Alaska, which also lowered the production forecast for partner ConocoPhillips (see related story). In July, BP also reported production losses at its Venezuela operations, and it said it was still recovering from last year’s hurricanes (see NGI, July 10).
BP reported its Gas Power & Renewables earnings in the quarter also are expected to be sequentially lower because of “significantly weaker gas and power trading margins in North America.” BP’s Henry Hub natural gas price was $6.58/MMBtu in 3Q2006, down sequentially from 2Q2006’s $6.80/MMBtu, and well below the $8.53/MMBtu in 3Q2005.
BP expects to record a 3Q2006 pretax gain of about $2 billion for aggregate nonoperating items, which primarily will reflect gains on upstream asset sales. Total consolidated interest charges are estimated at around $100 million for the quarter. BP is scheduled to announce its quarterly results on Oct. 24.
In related news, BP executives and the board of directors are being sued in Superior Court in Anchorage for allegedly breaching their fiduciary duties in running U.S. operations. The 100-page lawsuit, which was filed last week, contends the executives and board members were negligent in their oversight of pipelines in the Prudhoe Bay, AK, field, refinery operations in Texas City, TX, in which 15 people were killed, and in an alleged price-fixing scheme in the propane market.
The Commodity Futures Trading Commission filed a civil enforcement action against BP Products North America in June for allegedly cornering the propane market in February 2004 to drive up prices (see NGI, July 3). Federal investigators also are investigating whether BP manipulated crude oil and unleaded gasoline markets in 2002, 2003 and 2004 (see NGI, Sept. 11).
According to the lawsuit, BP presented itself as “an exceptionally progressive, highly ethical and environmentally sensitive corporation, which stressed safety in its operations.” However, “the true facts were quite different than these corporate fiduciaries presented to BP’s owners — its shareholders.” The lawsuit said, “Unfortunately, BP has a long and sordid history of environmental law violations its executives now try to camouflage with a little green and yellow sunburst,” a reference to BP’s company logo.
The lawsuit, filed by Unite Here National Retirement Fund, is seeking unspecified damages. The fund holds 6,000 BP negotiable certificates.
Houston-based Marathon Oil Corp. reported last week that it sold about 350,000 boe/d of oil and natural gas in 3Q2006, in line with a previous forecast to sell between 340,000-360,000 boe/d. Net natural gas sales totaled 530 MMcf/d, sequentially higher than the 523 MMcf/d reported in 2Q2006, but lower than the 562 MMcf/d reported for the same period a year ago.
In an interim update, Marathon said its Henry Hub gas market price indicators weakened in 3Q2006, but actual domestic gas price realizations “showed a small improvement” in July and August, the first two months of the quarter. Marathon’s Henry Hub prompt gas price for 3Q2006 was $6.12/MMBtu; for July and August, it was $6.61/MMBtu. In 3Q2005, the Henry Hub prompt gas price was $9.73/MMBtu.
Estimated 3Q2006 exploration expenses are expected to range between $75-$110 million. U.S. exploration expense is now estimated to be between $35-$45 million; international exploration expense is estimated to be $40-$65 million. During the quarter, Marathon bought 8,700 net acres of gas-weighted properties in the Piceance Basin of Colorado in a cash transaction valued at $354 million (see NGI, July 24). The properties complement Marathon’s other Rockies assets in the Powder River Basin of Wyoming, where it is one of the largest leaseholders.
In the quarter Marathon continued its $2 billion share repurchase program, with the purchase of 7.1 million shares of common stock at a cost of $600 million. Through the first nine months of 2006, Marathon has repurchased 14.7 million shares of stock at a total cost of $1.2 billion.
Marathon is scheduled to report its 3Q2006 results on Oct. 31.
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