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BP profit falls 3.6% as U.S. woes continue

The oil giant's quarterly net income declines to $6.23 billion on lost Alaskan production, higher taxes in Britain and a drop in gas prices.

October 25, 2006|From the Associated Press

Oil giant BP said Tuesday that its third-quarter profit declined 3.6%, slumping on lost Alaskan production, higher taxes in Britain and a sharp drop in gasoline prices.

BP, which has experienced a run of difficulties in the United States, also lowered its average daily oil production forecast for 2006 because of asset sales and snags at several oil fields.

The first of the major oil companies to report quarterly earnings this week, BP said net income for the three months ended Sept. 30 came to $6.23 billion, compared with $6.46 billion in the third quarter of 2005.

Revenue climbed 4% to $70.7 billion.

Production for the period averaged the equivalent of 3.8 million barrels of oil a day, down 0.2% from a year earlier and down 5% from the second quarter this year.

Other oil majors including Chevron Corp., ConocoPhillips, Exxon Mobil Corp. and Royal Dutch Shell are expected to unveil solid profits this week, but analysts say earnings in the sector have passed their peak after a substantial recent slump in gasoline and natural-gas prices.

The results from BP reflected the London-based company's woes in the U.S.

The company halved production at its Prudhoe Bay field in Alaska, the largest in the U.S., after severe pipeline corrosion and a small leak were uncovered.

Production has reached 400,000 barrels per day, double the low point but still below the previous average of 450,000 barrels a day.

"Overall the trading environment is now weaker than it has been for the last five quarters," Chief Executive John Browne said.

In addition to its U.S. production troubles, BP faced higher taxes in Britain's North Sea and lower refining margins.

Average profit from refining fell 32% after being boosted in the year-earlier period by the effect of hurricanes.

BP's adjusted net profit -- earnings before extraordinary items and excluding changes in the value of inventories -- was $4.5 billion. That was slightly lower than the $4.74 billion expected by analysts.

BP shares gained 44 cents to $68.30. The stock has fallen 11% since April as the company struggles to restore its profile after investigations into a March 2005 refinery explosion in Texas that killed 15 workers and allegations that it manipulated crude-oil and gasoline markets in the United States.

BP has already settled several lawsuits relating to the Texas City blast and said Tuesday that it had put aside an additional $400 million to resolve legal disputes, bringing the total bill -- including repairs and lost profit -- to about $2 billion. The company also began a complete review of its global operations after the blast.

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