BP on course to set new profits record as oil soars

BP is likely to smash last year's multibillion-pound profits record despite revealing yesterday that refining margins had shrunk and production growth had stalled in the first quarter.

BP is likely to smash last year's multibillion-pound profits record despite revealing yesterday that refining margins had shrunk and production growth had stalled in the first quarter.

Analysts said that given the booming oil price and additional oil and gas fields that will come on stream this year, the company is on course to beat the £16.2bn net profit it made in 2004.

The price of oil continued to boom yesterday, setting a new record of $58.28 in New York, before easing back slightly. In response, Opec producers said they had begun discussing raising output, for the second time this year. Separately, the International Air Transport Association said it expected the airline industry to make a combined loss of $5.5bn (£3bn), due to the higher price of fuel.

In its trading update on the first quarter, BP said production was expected to be about 4.09 million barrels of oil a day, roughly the same as the fourth quarter of 2004. The figure was up on 2004's first quarter, in which 4.02 million barrels were produced a day.

Jonathan Copus, an analyst at Investec Securities, said: "A lot of [production] growth is loaded towards the end of the year. We know that a number of giant fields will come on in the fourth quarter." The company said it was on course to meet its average production targets for 2005 of 4.1 to 4.2 million barrels a day. Angus McPhail, of ING, estimated BP could add 400,000 barrels of production a day by the end of this year. "Although investors see risks in its Russian interests, the real growth story this year for BP is in the Gulf of Mexico and other areas of the world," he said.

Among the key offshore projects in the Gulf of Mexico coming into production this year are "Mad Dog" and "Thunder Horse". Elsewhere, new schemes from which BP will benefit include a gas project in Algeria and its interests in Azerbaijan.

In the first quarter of 2005, the price BP achieved for its crude oil was well up ­ Brent production got $47.62 a barrel, compared with $32.03 for the same period last year.