BP reveals record profits as fuel prices leap

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The Independent Online

Oil giant BP today said record fuel prices and better refining margins had helped it to bank nearly £1 million a day in profits.

BP posted profits of 3.94 billion US dollars (£2.14 billion) for the three months to September 30 and adopted a bullish tone when assessing the outlook for the rest of 2004.

Its performance was lifted by the sustained rise in oil prices due to the loss of production in the US following Hurricane Ivan, low inventories and limited spare capacity.

Oil prices averaged nearly 50 US dollars in October and a barrel of Brent crude for December delivery traded at 50.78 US dollars on the markets today.

The profits bonanza is likely to reignite anger among motorists who have seen petrol prices jump 10% this year, with a litre of unleaded currently costing a 84.3p.

But the AA motoring organisation said BP could not be accused of "excessive profiteering" as 75% of the cost of petrol and diesel went to Treasury coffers in the form of tax.

Chief executive Lord Browne said BP had performed strongly on the back of strong global demand, but shares fell 1% today because the group failed to smash market forecasts.

Zac Philips, of brokers Teather & Greenwood, said: "Analysts always look to be surprised on the upside and these results actually haven't done that. There will be a few disappointed people out there."

Investors also anticipated there would be less surplus cash to repurchase its own stock next year. BP was expected to spend 7.5 billion US dollars (£4.08 billion) on buybacks this year and a similar sum in 2005.

Fears that the buyback programme would be scaled back followed the news that BP would spend 14 billion US dollars (£7.6 billion) on infrastructure next year - more than previously thought.

This was due to the weakness of the US dollar and higher prices for capital goods such as steel, which is used in pipelines and oil rigs.

The profits figure for the third quarter includes exceptional costs of 401 million US dollars (£217.8 million), reflecting environmental clean-ups and other charges.

BP said profits in the first nine months of the year were 26% higher than a year ago at 12.56 billion US dollars (£6.83 billion).

There was a 30% improvement in profits from exploration and production as BP reaped further benefits from its tie-up with Russian oil group TNK.

Refining margins slipped back from record levels in the second quarter but remained high due to strong growth in demand and low stocks, BP said.

Lord Browne said the group was on track to hit its investment targets and buy back more of its own shares.

The world economy was likely to continue to grow at current trends, although he saw signs of a slowdown in parts of Asia, including China.

Economic recovery in the United States appeared to have gathered speed in the third quarter, but Europe was failing to keep pace.

"The outlook for the rest of 2004 will depend upon the rate of US production recovery after Hurricane Ivan and the strength of oil demand growth," Lord Browne said.

Political stability in oil-producing nations and decision-making by oil cartel Opec also had the potential to force fuel prices higher, he added.

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