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BP spells out its troubles after profits dive 45%
Robert Lea, Evening Standard23.10.07
The extent of BP's woes were laid bare today as the oil major reported a 45% slump in third-quarter profits.
New chief executive Tony Hayward had already prepared the City for the worst after labelling BP's operational performance as “dreadful” and orderinga middle management cull.
But even after stripping out exceptional items, BP's profits between July and September were down 26% at $4.2 billion far worse than most analysts' forecasts. Profits for the first
nine months of the year are down 21% at $13.5 billion.
Just five months after the departure of former chief executive Lord Browne after lying in a court case, BP today produced its worst quarterly performance in years.
The results chronicled a litany of underperformance.
In exploration and production, profits crashed 36%, with earnings halving in BP's heartlands in the UK and US as well as its Russian joint venture.
Much of that fall was from soaring costs that Hayward has vowed to take an axe to, but production volumes were also poor. Average production in the three months fell to 3.651 million barrels a day, 4% lower than a year ago.
Average daily production for the nine months now stands at 3.788 million barrels below the already downwardly revised forecast of 3.8 million to 3.9 million barrels for the full year.
Earnings from refining and marketing — traditionally about one-sixth of BP's business — slumped 75% on rising repair costs and the extended shutdowns at its Whiting refinery in the US and delays in getting Texas City back into commission after the fatal explosion there two-and-half years ago which has so damaged BP's reputation.
The group's gas, power and renewables business plunged into the red after increased spending on alternative energy. Hayward has said the division
is to be broken up in a move that will give greater visibility to the spending and returns from the green strategy.
Analysts believe this year's third quarter will be the point from which the oil major begins its recovery.
Broker Citigroup said: “The market will now look to operational recovery in both the upstream and downstream divisions in the fourth quarter.”
