BP Production Woes and Lower Crude Oil Prices Expected to Curb 3Q Revenue
A pipeline leak in Alaska, production outages in the Gulf of Mexico, allegations of market manipulation, an investigation and lawsuits into a deadly refinery blast -- there seems to be no end to BP PLC's troubles in the United States.
Those woes, combined with a drop in crude oil prices, are expected to be reflected in the London-based oil company's quarterly earnings report on Tuesday.
Analysts expect BP, one of the world's largest oil companies, to report an adjusted net profit of $4.74 billion for the three months ended Sept. 30, down 11 percent from $5.33 billion in the same quarter a year ago.
The company said earlier this month that oil and gas production fell 0.6 percent to 3.824 million barrels a day in the third quarter -- the fifth consecutive quarterly drop -- as production cuts at its Alaskan oil fields following a pipeline leak in August added to existing problems in the Gulf of Mexico.
BP also reported lower refining margins, a drop in the price it gets paid for gas, a higher tax burden and lower production at its joint venture in Russia.
The third-quarter result, which BP said reflected "the impact of divestments, maintenance and operational downtime," was also 218,000 barrels below the level reached in the second quarter of this year and underlined the problems facing the company.
BP's value has fallen 20 percent since April following the Alaskan spill of some 267,000 gallons of oil at Prudhoe Bay, investigations into the Texas City refinery explosion, delays to the opening of the key Thunder Horse platform in the Gulf of Mexico following hurricane damage, and allegations that it manipulated crude-oil and gasoline markets in the United States.
Its shares were barely changed in London trading Monday ahead of the results announcement, down just 0.1 percent to close at 601.5 pence ($11.26).
Societe Generale, which rates BP at sell, says the company's quarterly profit drop will be biggest among European oil majors.
Prudential Equity Group said it was lowering its full year earnings per share estimate for the company to $6.43 from $6.52 to reflect lower production and international refining margins.
BP has already settled several lawsuits relating to the March 2005 Texas City blast that killed 15 workers and has put aside $1.2 billion to resolve legal disputes.
Chief Executive John Brown has been ordered to appear in court to give a sworn deposition in one lawsuit brought by a woman whose parents were among those killed.
BP also began a complete review of its global operations following the blast.
The company has declined to comment on a report by the British Broadcasting Corp. that a probe by the U.S. Chemical Safety Board into the explosion has attacked the company's safety standards. The BBC said that the report by the CSB, which is due for release early next year, alleges that the eight previous safety incidents at the facility were not property investigated, and that the right corrective actions were not taken.
Even as BP prepared to release its earnings, the bad news out of the United States continued -- it revealed Monday that it had reported an emission of nitrogen oxide because of a heater leak from its oil refinery in Carson, near Los Angeles, to California public safety agencies.
The Carson refinery, which processes around 268,000 barrels of crude oil a day, has reported three other emissions events in the past month.
Falling oil prices have further depressed BP shares, with crude hitting a seven-month low below $59 a barrel Monday -- down from a record $78.40 a barrel reached in July. Oil prices have eased as an end to fighting in Lebanon reduced concerns about Middle East supplies and the U.S. hurricane season left production intact.
