Tuesday, April 28, 2009

BP Q1 Profit Plunged 62% As Demand For Crude And Gas Declined

. Tuesday, April 28, 2009

By stockOzone team

BP's profit plunged by 62 per cent in the first quarter of 2009 after oil prices fell from July's record highs and demand for crude and gas declined in weakening economics.

Net profits in the first three months of its financial year fell from $7.1 billion (£4.8 billion) in 2008 to $2.56 billion which BP blamed on what it called "lower realizations", or lower oil prices. Despite the decline, today's result was ahead of analysts' forecasts for profit of $2.28 billion and shares in BP rose 1.1 per cent to 489p in early trading.

BP said that during the first quarter, the price it achieved for each barrel of oil was $41.26, compared to $90.92 in 2008. During last year, oil prices reached a record high of $147 a barrel in July.

Gas was sold for $3.63 per thousand cubic foot, against $5.88 this time last year.

Even compared with the fourth quarter of last year, underlying profits were down, again reflecting the softening oil price. Profits were off $200 million, or 8 per cent, compared with the fourth quarter of last year.

The decline in production revenues was tempered by an 11 per cent decrease in production costs, although this was not enough to contend with such a sharp swing in the oil price. Income at the production and exploration division was down 57 per cent to $4.3 billion.

Despite the trading pressures, BP increased production by 4 per cent during the quarter, as its Thunder Horse fields in the Gulf of Mexico began to ramp up production. The company repeated its statement that it expects production volumes to increase during the whole year, but said the exact amount would depend on the oil price and quota restrictions decided by OPEC, the oil producers' cartel.

Profits at BP’s other main trading division, its refining and marketing operation, were also down 13 per cent to $1.1 billion. Refining volumes were "significantly worse" than a year ago, and margins were lower. BP expected the "overall weak environment for marketing and petrochemicals to continue" into this year.

BP was also hit by an increased pension charge, paying $368 million in retirement costs in the three months, compared with $246 million a year ago. It blamed a reduced "expected return on pension plan assets", reflecting the collapse in equity markets around the world.

Despite the economic pressures, BP increased its quarterly dividend payout by 4 per cent to 14 cents a share. Aided by the weakness of the pound, in sterling terms the dividend is 9.584p, up 40 per cent. It ended the quarter with net debts of $26.7 billion.

Disclosure: Author does not own any of the stocks discussed here.

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