Company Of The Week: BP Amoco

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The Independent Online
BRITAIN'S biggest company, BP Amoco, said profit rose 19 per cent in the second quarter after oil prices surged and cost cuts from its $62bn (pounds 38.6bn) purchase of Amoco began to materialise.

Profit rose to $1.37bn before one-time items from $1.15bn in the year- earlier period. Like most oil companies, BP Amoco reports in dollars.

The gain exceeded analysts' forecasts of a 9 per cent increase and outshone results of the top five US oil companies, where profit fell 18 per cent on average.

"The results are sparkling," said John Toalster, an analyst at SG Securities. "They are doing remarkably well."

BP Amoco shares initially surged on the results, but later fell back to end the day, and the week, a shade lower. The company is Britain's largest by stock market value, worth almost pounds 120bn, accounting for almost 10 per cent of the FT-SE 100 index.

The glittering results showed chief executive John Browne is making good on a promise to cut $4bn in expenses over three years after the Amoco purchase in December. He said that as many as 14,500 jobs will be eliminated by the end of this year, more than previously forecast. Already, 12,500 jobs have gone.

Cost cuts added $550m to profit in the latest quarter, the company said, more than offsetting a $350m decline from shrinking margins from refining and chemicals.

"Our outlook is rather more promising than it has been for some time," Mr Browne said. "All business segments are contributing to lower costs and enhanced margins."

He said the company was still on track to complete its $36bn purchase of Atlantic Richfield this year, generating a further $1bn of savings. That takeover will strengthen BP Amoco's rank as the world's third-biggest publicly traded oil company.

"BP's performance has been astonishing; they are a great company," an analyst said.