BP’s Hayward claims oil giant is back on track

Robert Lea
27 Oct 2009

Rising production and the most benign hurricane season in recent years has seen BP thrash City estimates and report a 60% surge in profits to $4.7 billion (£2.8 billion) over the summer.

UK shareholders and especially the big City pension funds who so rely on income from BP will be disappointed, however. The oil giant has kept its quarterly dividend at 14 cents a share which in sterling terms equates to a cut from 8.7p a share to 8.5p.

The results, though well down on 2008 when BP made $42 billion of profits from an oil price that surged to as high as $147 a barrel, were due to BP's operations getting back on track, said chief executive Tony Hayward.

Hayward has spent much of his two years in charge at BP picking up the pieces from the reign of “the Sun King” of the oil industry Lord Browne, the former chief executive whose reign ended in ignominy two years ago in a High Court perjury case.

Overmanning in middle management and operational sloppiness has been cut as Hayward has slashed thousands of jobs.

“These results demonstrate real operational momentum across the company,” said Hayward. “We continue to transform our cost base and grow upstream production volumes.

“Even in the tough conditions that prevail in many of our markets, we can continue to deliver on our promise to invest in future growth while meeting our commitments to shareholders today.”

Hayward reported a 7% rise in third-quarter production to 3.9 million barrels a day at a time when unit costs have been slashed 18% or $3 billion year on year. In the year to date, that average 3.9 million barrels a day output is 4% higher than in 2008.

The news sent BP shares surging 4%, up 30p to 597p, the biggest rise in the FTSE 100 from what is the second-largest blue chip stock.

BP's third-quarter profit of $4.7 billion compares to $2.9 billion in the second quarter.

While the profits are down around 50% year on year, that is way better than analysts had been expecting. Forecasts had indicated a year-on-year fall of more than 60%.

The benign hurricane season this year has also helped BP, with Hayward pointing to a good performance from higher-margin operations like those in the Gulf of Mexico where the company's giant Thunder Horse platform is now in full production.